380,712 research outputs found
Essays on incentive contract and corporate finance
The three essays collected in this PhD thesis are on topics of incentive contracts and corporate finance. The first essay examines the role of CEO’s option compensation in a bank’s contribution to systemic risk. Employing a regulatory change of accounting standard of option compensation as an exogenous shock, this study suggests that even though a regulatory change may substantially reduce the use of option compensation in CEO’s compensation, the banks may substitute with other types of incentive compensation tools to keep their managers incentivized and take on more correlated risks; resulting in the systemic risk of banks increased after the regulatory change. The second essay studies the CEO’s performance evaluation contract, called the relative performance evaluation (hereafter RPE), and explores its relation to the accounting conservatism of a firm. The results suggest that the use of RPE may provide effective monitoring of a CEO’s performance, which makes a CEO’s action more verifiable when information asymmetry is high or when there is a weak board of directors; in turn, increases the level of accounting conservatism of a firm. The third essay explores the corporate investment strategy between two CEO groups: CEOs who recently beat performance targets by a narrow margin versus those who recently missed performance targets by a narrow margin. The results suggest that CEOs who narrowly beat a target, are trying to increase investment with short-term benefits at the cost of reducing investment with long-term benefits, to create an overly optimistic picture of companies to the shareholders and markets
Consequences of Marketing Asset Accountability—A Natural Experiment
Marketing scholars have extensively studied marketing's effect on firm value and have developed metrics and dashboards to help establish marketing accountability. However, empirical evidence of marketing accountability's specific outcomes is scarce and mainly derived from surveys. It also lacks consideration of outcomes beyond the marketing function's standing in the firm, thus overlooking possible downsides and outcomes with regard to external stakeholders such as investors. Using a natural experiment—Australia's change from a nonrestrictive to a restrictive accounting regime—this study investigates how accountability for the financial value of marketing assets (marketing asset accountability) affects a firm's marketing management focus on short-term vis-à-vis long-term marketing efficiency, its cost of capital, and the degree to which its stock price reflects actual future performance (i.e., stock price informativeness). The results show that marketing asset accountability improves long-term marketing efficiency, reduces cost of equity, and improves stock price informativeness, but does not consistently affect short-term marketing efficiency and cost of debt. Moreover, although marketing-intensive firms are commonly assumed to benefit most from marketing asset accountability, this is not the case. These results have implications for researchers, managers, and public policy decision makers. </jats:p
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Disappearing Stock Options: The Evolution of Equity Pay
Executive compensation has skyrocketed over the last thirty years, largely due to an increased use of equity pay. Corporations were able to generously compensate their top executives, and, at least in the short term, link executive pay to firm performance. Thanks to modifications to the tax code and accounting rules in 1993, public companies favored the grant of options over stock. Yet this produced perverse incentives, including excessive risk-taking and a heightened focus on short-term stock performance, which many commentators and policy-makers believed culminated in the 2008 financial crisis. In response, public resentment swelled, spurring academic debates, congressional hearings, and statutory changes. This trend shifted in the past decade as companies now impel conservative behavior through executive compensation. This Note presents the first comprehensive study of the change in the equity composition of executive compensation after the financial crisis. For the first time, stock grants overtook options as the dominant form of equity pay. The evidence shows that the movement away from stock options is largely a response to the panoply of federal efforts to control ‘excessive’ executive compensation and mitigate risk. This finding has important implications for regulators and shareholders alike who wish to offset managerial influence over executive pay at public companies
Valuation of Brands - A Critical Comparison of Different Methods
In recent years intangible assets have become increasingly important for many companies. One significant category of intangible assets are brands. Because of their growing importance, researchers have begun to develop methods to better measure and account for brand names. Traditional brand management performance measures usually are short-term oriented and give no incentives to invest in brands but rather lead to short-term activities which harm longterm brand value. This is alarming, especially for companies where brands are the main assets. Brand value, if correctly measured, could represent a useful goal for the management of brands. In mergers and acquisitions, brand value could help in determining a corporation's price and support the decision process. Another area where a valid brand valuation method would be helpful is the licensing of brands. Finally, brand valuation is needed for balance sheet purposes. So far, current accounting standards in Germany assign no balance-sheet value to brand names until another firm acquires them. But since brands are legal in balance sheets of companies in other European countries, German law might change in order to harmonize European law. Then, an accepted valuation method will be indispensable. Depending on the purpose of brand valuation and on the method used, different brand values will result. But as long as valuation methods are not objective and comparable, companies will be reluctant to the valuation of brands. This paper evaluates the usefulness of methods in order to use brand value as a long-term performance measure in brand management and controlling
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Financing SMEs: a model for optimising the capital structure
This paper argues that the existing finance literature is inadequate with respect to its cov-erage of capital structure of small and medium sized enterprises (SMEs). In particular it is argued that the cost of equity (being both conceptually ill defined and empirically non quantifiable) is not applicable to the capital structure decisions for a large proportion of SMEs and the optimal capital structure depends only on the mix of short and long term debt. The paper then presents a model for optimising the debt mix and demonstrates its practical application using an Italian firm’s debt structure as a case study
Financing mix of non-financial corporations: evidence from European countries
This study analyses the financing decisions of listed non-financial corporations in France, Germany and the UK over the period 1969 to 2000. These countries represent satisfactorily different financial structures of their classes, Le., Latinic, Germanic and Anglo-Saxon traditions, respectively. Thus, this thesis attempts to shed light on the impact of institutional differences (accounting and taxation systems, bankruptcy laws, corporate governance structure) on corporate financing mix policies. The empirical investigation comprises three main themes; capital structure (debt versus equity), debt maturity structure (short-term versus long-term debt), and debt ownership structure public versus private debt). It is obvious that factors influencing financial strategies of firms change overtime and firms are expected to adjust themselves to their target financing structure according to random events. For these reasons we use dynamic panel data and choose Generalised Methods of Moments (GMM) as an appropriate estimation procedure for our autoregressive-distributed lag model GMM methodology overcomes the problems of endogeneity, heteroscedasticity, normality, simultaneity and measurement errors, which are common for studies using firm-level data. The empirical evidence shows that corporate financing decisions are determined by both firm-specific (profitability, tangibility and maturity of assets, growth, quality, size, liquidity, payout policy, corporate tax rates, and earnings volatility), and market-related factors (term structure of interest rates, market equity premium, interest rate volatility, stock return volatility, stock price performance). However, the strength and nature of the effect of these factors are dependent on the financial environment and tradition of the countries of interest. Therefore, our research argues that financing mix decisions of firms are not only the product of their own characteristics, but also the outcome of environment and traditions in which they operate
The person-organization fit of accounting students: long term value change following an education intervention
The accounting profession continually has problems with hiring and keeping qualified staff; and many accounting scandals have shown a lack of ethical behavior on the part of Certified Public Accountants (CPA). This suggest a misfit between those in the profession and the ethics that the profession strives towards. Research has shown that the congruity of personal values with organizational values, person-organization fit (P-O fit), is an important factor in the hiring, socialization, and retention of employees. In addition, ethical behavior has been found related to P-O fit. Accounting educators have been called upon to address these problems by inculcating accounting students with the values of the accounting profession.
This research firstly reports on the results of a comparison of the personal values of upper level accounting students in Georgia with the personal values of CPA leaders in Georgia. Personal value priorities were measured with the Rokeach Value Survey (RVS). The findings indicated that these samples of Georgia CPA leaders (N = 193) and accounting students (N = 516) significantly differed in the priority given to 24 of the 36 (66.7%) RVS values. This result suggests a lack of P-O fit between accounting students and the accounting profession.
Secondly, this research reports on the effectiveness of two education interventions designed to improve the P-O fit of accounting students: a Curriculum Modification Intervention and a Value Self-Confrontation (VSC) Intervention. These education interventions were delivered online as part of the content of two distance learning classes on accounting ethics. The curriculum of both classes were augmented with content aimed at increasing the priority given to the value of courageous. The two classes were designated as either Group 1 or Group 2. Group 1 received only the Curriculum Modification Intervention. Group 2 received both the Curriculum Modification Intervention and the VSC Intervention, which was targeted at increasing the priority given to the four values of capable,
courageous. honest, and responsible—values related to the Code of Professional Conduct and Bylaws (2012) of the American Institute of Certified Public Accountants.
The results indicated that Group 1, from the beginning to the end of class (short-term value change), did not increase the priority given to courageous. Thus, the stand-alone Curriculum Modification Intervention did not result in the desired effect. Group 2, on the other hand, did increase the short-term priority given to all four of the targeted values. Moreover, Group 2 increased the long-term priority given to two of the four targeted values: capable and courageous. The higher priority given to these values at the end of class persisted for 15-16 weeks. The effect sizes indicated practical significance. These results suggest that the VSC Intervention was effective at inducing both short-term and long-term value change in the priority given to values of importance to the ethics of the accounting profession.
These findings have implications for CPA firms, specifically with regard to hiring ethically “fitting” staff and fostering an ethical culture in accounting firms. The results of this research also provide input that may be helpful in improving accounting pedagogy, especially the pedagogy of accounting ethics education and distance education.
Key words: person-organization fit, P-O fit, CPA firm turnover, personal values, value change, value self-confrontation, VSC, Rokeach Value Survey, RVS, Certified Public Accountant, CPA, ethics education, accounting students, online education, distance learning.Business ManagementD.B.L
The short term debt vs. long term debt puzzle: a model for the optimal mix
This paper argues that the existing finance literature is inadequate with respect to its coverage of capital structure of small and medium sized enterprises (SMEs). In particular it is argued that the cost of equity (being both conceptually ill defined and empirically non quantifiable) is not applicable to the capital structure decisions for a large proportion of SMEs and the optimal capital structure depends only on the mix of short and long term debt. The paper then presents a model, developed by practitioners for optimising the debt mix and demonstrates its practical application using an Italian firm's debt structure as a case study
The effect of firm characteristics and good corporate governance characteristics to earning management behaviors
Purpose: This research is carried out to investigate the influence of firm characteristics and good governance characteristics to earnings management behavior. Furthermore, the research is expanded to determine the predictive discretionary accruals models in Indonesia. The author utilizing firm listed in Indonesia Stock Exchange during 2014 – 2018 as research object. Design/methodology/approach: The research samples is selected by utilizing the purposive sampling method. In addition, the data analyze is conducted through E-Views version 10. Three discretionary accruals models is used to define earnings management behavior. The research assumed firm characteristics factors such as financial performance, firm size, leverage, and share issuance activity and good governance characteristics such as board of directors’ size and auditor’s size. Findings: The research discovers that firm characteristics can accentuate the earnings management behavior significantly. In other hand, in good corporate governance characteristics only big four auditor is significant. The research also find that discretionary accruals model of Jones, Dechow, and Kothari are predictive in Indonesia. Practical implications: The discoveries of this research provide understanding for investors that enforcement on both governance and monitoring mechanism are essential approach to reduce earnings management behavior. Originality/value: The research investigated three models of discretionary accruals’ capability in predicting earnings management behavior, and found out all discretionary accruals model are still relevant to be use in predictive to define earnings management behavior in Indonesia.peer-reviewe
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Enterprise Risk Management: Review, Critique, and Research Directions
© 2014 Elsevier Ltd. Many regulators, rating agencies, executives and academics have advocated a new approach to risk management: Enterprise Risk Management (ERM). ERM proposes the integrated management of all the risks an organization faces, which inherently requires alignment of risk management with corporate governance and strategy. Academic research on ERM is still in its infancy, with articles largely in accounting and finance journals but rarely in management journals. We argue that ERM offers an important new research domain for management scholars. A critical review of ERM research allows us to identify limitations and gaps that management scholars are best equipped to address. This paper not only identifies how management scholars can contribute to ERM research, but also points out why ERM research (and practice) needs management research for its development
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