Do CEO’s Long-Term Performance Incentives Induce IT Investments? Theory, Evidence, and Industry Contingencies

Understanding the antecedents of IT investment decisions is a significant line of enquiry in the IT business value literature. Although previous research has shown a positive link between long-term performance plans and corporate decision making, the association between the use of long-term performance plans and IT investment is understudied in the extant literature. Drawing on agency theory, we posit that the existence of a long-term performance plan and a greater percentage of compensation based on long-term measures are associated with a greater percentage of IT investments to sales. We further propose that these relationships are contingent upon the nature of the industry and the IT role within the industry. Specifically, we assert that high-tech industries witness stronger associations between long-term performance plans and IT investments, while industries where IT plays a transformative role witness weaker relationships. Our empirical analysis of 173 firms in the Unites States supports our theoretical propositions

Can long-term performance plans mitigate the negative effects of stock consideration and high cash for acquirers?

Compensation, Mergers, Performance, G14, G34, M41,

Characteristics Associated with the Corporate Decision to Adopt Long-term Performance Plans

This study investigates why firms adopt long-term performance plans. The results provide evidence that firms that adopt long-term performance plans have higher risk as measured by Beta, have lower percentages of managerial stockholdings, have higher levels of investment in research and development expenditures two years prior to adoption of a long-term performance plan, and experience increases in the ratio of debt to total assets in the two year period prior to long-term performance plan adoption. Also, firms increase their investments in research and development and capital expenditures following adoption of long-term performance plans. Copyright Blackwell Publishers Ltd, 2002.

The Effect of Long-term Performance Plans on Corporate Sell-Off-Induced Abnormal Returns.

This study examines the association between long-term performance plans and wealth effects accruing to stockholders of divesting firms at announcements of sell-off propos als. The results indicate that divesting companies with long-term per formance plans experience a more favorable stock-market reaction at t he announcement of sell-off proposals relative to firms without long- term performance plans. The findings imply that longterm performance plans serve as an effective mechanism to motivate managers to make better decisions. Copyright 1987 by American Finance Association.