Are U.S. CEOs Paid More than U.K. CEOs? Inferences from Risk- Adjusted Pay (CRI 2009-003)

We compute and compare risk-adjusted pay for US and UK CEOs, where the adjustment is based on estimated risk premiums stemming from the equity incentives borne by CEOs. Controlling for firm and industry characteristics, we find that US CEOs have higher pay, but also bear much higher stock and option incentives than UK CEOs. Using reasonable estimates of risk premiums, we find that risk-adjusted US CEO pay does not appear large compared to that of UK CEOs. We also examine differences in pay and equity incentives between a sample of non-UK European CEOs and a matched sample of US CEOs, and find that risk-adjusting pay may explain about half of the apparent higher pay for US CEOs

Discussion of The Role of Accruals in Asymmetrically Timely Gain and Loss Recognition

Ball and Shivakumar (2005) augment existing models of expected accruals to incorporate conditional conservatism. They document a robust asymmetry in the relation between accruals and economic losses and gains, and demonstrate that accruals models that incorporate this asymmetry have increased explanatory power. This discussion of Ball and Shivakumar (2005) makes five main points: 1) incorporating asymmetry in gain and loss recognition is an important contribution to empirical models of expected accruals; 2) the economic underpinnings of asymmetry in loss and gain recognition remain open to considerable debate; 3) the extent to which accruals recognize gains in a timely manner remains an interesting but unanswered question; 4) non-working capital accruals are important to both the earnings process and accounting conservatism, yet modeling of nonworking capital accruals has received little attention in the literature; and 5) incorporating asymmetry into the accruals process has important implications for estimating discretionary accruals and for future research in this area

Conservative Financial Reporting, Debt Covenants, and the Agency Costs of Debt

Considerable research has documented the role of debt covenants and conservative financial accounting in addressing agency conflicts between lenders and borrowers. Beatty, A., Weber, J., and Yu, J. [2008. Conservatism and debt. Journal of Accounting and Economics, forthcoming] document interesting, but mixed, findings on the relation between debt covenants and conservative accounting, and the extent to which the two contracting mechanisms act as substitutes or complements. In this paper, I discuss the economic roles of financial reporting, debt covenants, and conservatism within the debt contracting environment, and attempt to fit BWY\u27s findings within this context

Discussion of Accounting Discretion, Corporate Governance, and Firm Performance

Bowen, Ragjopal, and Venkatachalam (2008) explore whether managers, on average, use accounting discretion for reporting objectives that are in the interests of shareholders (e.g., signaling, tax minimization, etc.), or alternatively whether managers use discretion opportunistically in the presence of governance structures that allow greater discretion. The authors find that although accounting discretion is positively related to governance structures that allow managers greater discretion in decision-making, there is no evidence that the portion of accounting discretion related to governance structures is negatively associated with firm performance. In this discussion, I emphasize the importance of decision rights allocation within widely held corporations, and how this allocation naturally leads to cross-sectional variation in the degree of discretion afforded managers. In contrast to much of the existing governance literature, I argue that governance structures that allow managers greater discretion in making decisions do not necessarily imply weak/poor governance. For example, it is difficult to see why a firm that allocates the least possible decision-making rights to their board or executives is necessarily the firm with highest quality governance. I also discuss why the observed relation between accounting discretion and firm performance may be uninformative about whether accounting discretion is used for opportunistic purposes. If shareholders/boards thoughtfully select an appropriate amount of overall decision-making discretion to allow managers, it will be difficult to determine whether specific types of discretion are used opportunistically

Executive equity compensation and incentives: a survey

Stock and option compensation and the level of managerial equity incentives are aspects of corporate governance that are especially controversial to shareholders, institutional activists, and government regulators. Similar to much of the corporate finance and corporate governance literature, research on stock-based compensation and incentives has not only generated useful insights, but also produced many contradictory findings. Not surprisingly, many fundamental questions remain unanswered. In this study, the authors synthesize the broad literature on equity-based compensation and executive incentives and highlight topics that seem especially appropriate for future research.Executives ; Stockholders ; Corporate governance

MicroRNAs and the functional β cell mass: For better or worse.

Insulin secretion from pancreatic β cells plays a central role in the control of blood glucose levels. The amount of insulin released by β cells is precisely adjusted to match organism requirements. A number of conditions that arise during life, including pregnancy and obesity, can result in a decreased sensitivity of insulin target tissues and a consequent rise in insulin needs. To preserve glucose homoeostasis, the augmented insulin demand requires a compensatory expansion of the pancreatic β cell mass and an increase in its secretory activity. This compensatory process is accompanied by modifications in β cell gene expression, although the molecular mechanisms underlying the phenomenon are still poorly understood. Emerging evidence indicates that at least part of these compensatory events may be orchestrated by changes in the level of a novel class of gene regulators, the microRNAs. Indeed, several of these small, non-coding RNAs have either positive or negative impacts on β cell proliferation and survival. The studies reviewed here suggest that the balance between the actions of these two groups of microRNAs, which have opposing functional effects, can determine whether β cells expand sufficiently to maintain blood glucose levels in the normal range or fail to meet insulin demand and thus lead, as a consequence, towards diabetes manifestation. A better understanding of the mechanisms governing changes in the microRNA profile will open the way for the development of new strategies to prevent and/or treat both type 2 and gestational diabetes

Role of islet microRNAs in diabetes: which model for which question?

MicroRNAs are important regulators of gene expression. The vast majority of the cells in our body rely on hundreds of these tiny non-coding RNA molecules to precisely adjust their protein repertoire and faithfully accomplish their tasks. Indeed, alterations in the microRNA profile can lead to cellular dysfunction that favours the appearance of several diseases. A specific set of microRNAs plays a crucial role in pancreatic beta cell differentiation and is essential for the fine-tuning of insulin secretion and for compensatory beta cell mass expansion in response to insulin resistance. Recently, several independent studies reported alterations in microRNA levels in the islets of animal models of diabetes and in islets isolated from diabetic patients. Surprisingly, many of the changes in microRNA expression observed in animal models of diabetes were not detected in the islets of diabetic patients and vice versa. These findings are unlikely to merely reflect species differences because microRNAs are highly conserved in mammals. These puzzling results are most probably explained by fundamental differences in the experimental approaches which selectively highlight the microRNAs directly contributing to diabetes development, the microRNAs predisposing individuals to the disease or the microRNAs displaying expression changes subsequent to the development of diabetes. In this review we will highlight the suitability of the different models for addressing each of these questions and propose future strategies that should allow us to obtain a better understanding of the contribution of microRNAs to the development of diabetes mellitus in humans

The Transatlantic Defense Industrial Base: Restructuring Scenarios and Their Implications

Opportunities for the construction of a transatlantic defense sector are tangible, but significant obstacles may accelerate the formation of a bipolar industrial base. While market forces played a key role in the transformation and consolidation of these sectors in recent years, political considerations are largely responsible for a restructuring process that has been almost entirely among U.S. firms in the United States and among European Union companies in Europe. In this monograph, Dr. Terrence Guay examines the forces that have shaped the restructuring of the U.S. and European defense industries since the end of the Cold War, and presents factors that will influence further restructuring and consolidation in the short- and medium-terms. He contends that a transatlantic defense industrial base is preferable to a bipolar one, and recommends that the U.S. Government open its defense equipment market to more European firms, and that European governments reciprocate. Additionally, military forces should put greater effort into coordinating procurement requirements and needs, and firms should explore expanding transatlantic links.https://press.armywarcollege.edu/monographs/1749/thumbnail.jp