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This column analyzes the historical and legal background associated with the Chevron doctrine, the Supreme Court's reasoning that supports its decision to overturn the Chevron doctrine, and the potential impact of the Loper decision on the Treasury's regulatory authority. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Relative performance evaluation (RPE) intensifies competitive pressure by tying executive compensation to the profits of rivals. We show that these contracts make loan syndication harder by reducing banks' willingness to participate in loans underwritten by banks named in their RPE contracts. Lead arranger banks, which are more frequently named in RPE, hold larger shares of the loans they syndicate, and their borrowers receive smaller and fewer loans and face higher spreads. Our results highlight the tension between the normal benefits of competition versus the need for cooperation in loan syndication. [ABSTRACT FROM AUTHOR]

We examine the role of peer (e.g., Lipper manager indices) versus pure (e.g., S&P 500) benchmarks in fund manager compensation. We model their impact on manager incentives and then test those predictions using novel data. We find that 71% of managers are compensated based on peer benchmarks. Consistent with the model, peer-benchmarked fund managers exhibit higher effort generating higher gross performance and collect higher fee income. Analyzing advisors' choice between benchmark types, we show that peer-benchmarking advisors cater to more sophisticated and performance-sensitive investors, and are more likely to sell through direct channels, consistent with investor heterogeneity and market segmentation. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Recent Delaware Chancery Court decisions that boards are self-interested in setting director compensation have focused scrutiny on the pay-setting process used by corporations. We examine the effect of peer benchmarking on director compensation decisions. Director pay relates positively to peer director pay, and firms paying their directors highly are selected as peers. Moreover, firm performance and board advising performance are positively related to the talent component and are generally unrelated to the self-serving component of the peer pay effect. The evidence indicates that firms use peer benchmarking to justify high compensation mainly to attract talented directors to enhance board quality. [ABSTRACT FROM AUTHOR]

Identifying executives' industry affiliation with categorical membership, this study examines how moving to a different industry impacts mobility-compensation outcomes. On the demand side, we propose that audience ambiguity and commitment concerns regarding cross-category moves limit the potential compensation of industry-changing executives. On the supply side, we argue that executives might accept smaller monetary rewards in exchange for acquiring experience in a new domain. Since category status also affects audience evaluations of candidates and candidates' desire to affiliate with a specific social category, we further hypothesize that both demand and supply mechanisms are moderated by status differences between an executive's origin and destination industries. Our analysis of voluntary mobility and compensation patterns of S&P 1500 executives supports these arguments: industry-changing executives realize lower compensation than closely matched within-industry movers. As expected, the compressing effect of changing industry on compensation is contingent upon status differences across industries. Executives who transition to higher-status industries face more stringent compensation discounts, while those moving to lower-status industries experience similar compensation variation as within-industry movers. Our study advances category and status-attainment research by incorporating the influence of industry prestige on career outcomes of cross-category moves, while casting light on the individual consequences of executive mobility. [ABSTRACT FROM AUTHOR]

This article examines the role of fair value gains or losses related to Level 3 valuations in CEO cash compensation for U.S. financial firms. Our results show that Level 3 income is compensation-relevant. By separating Level 3 income into unrealized and realized Level 3 income, we find that CEO cash compensation is less sensitive to unrealized than realized Level 3 income, which indicates that compensation committees have a higher concern for the clawback problem associated with unrealized Level 3 income. A further analysis separating Level 3 income into positive and negative components shows that Level 3 losses are more compensation-relevant than Level 3 gains, thereby validating the argument that Level 3 losses are more credible than Level 3 gains. Overall, we find that Level 3 income is relevant for CEO cash compensation and that this phenomenon is mainly driven by its realized and loss components. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The literature provides conflicting arguments and mixed results regarding whether capital markets punish managerial myopia. Using managers cutting research and development (R&D) investments to meet short-term earnings goals as a research setting, this study reveals that capital markets penalize managerial myopia, especially for firms with high investor sophistication. Moreover, the negative market reactions to managerial myopia are weaker for firms with overinvestment problems than for those without such problems. Overall, the results support the notion that security markets are not shortsighted. In further analysis, we document that compensation, especially earnings-based compensation, may cause managers to behave myopically. Our study contributes to the literature, reconciling previously mixed findings by capturing managers' myopic behavior in a more targeted way and showing that markets punish myopic R&D cutting. [ABSTRACT FROM AUTHOR]

We build a novel comprehensive data set of new product trademarks as an output measure of product development innovation. We show that risk-taking incentives in CEO compensation motivate this type of innovation and that this innovation improves firm performance. Using an exogenous shock to executive compensation, we find that reductions in stock option compensation cause reductions in new product development. We also find that firms undertaking new product development experience increases in future cash flow from operations and return on assets. These findings suggest the importance of product development innovation to firms and new trademarks as a novel innovation measure. [ABSTRACT FROM AUTHOR]

This paper first documents the impacts of property age on the operational efficiency, portfolio risk and market valuation of REITs. Based on the findings, we examine three possible explanations why REITs own older properties. Using a comprehensive property-level data set of U.S. equity REITs from 1995 to 2020, we construct a firm-level property age measure based on the age of individual properties held by REITs. Controlling for important firm characteristics, we find that REITs holding more older properties exhibit lower operational efficiency, lower firm value and higher firm risk than their counterparts. Moreover, while the stockholders do not enjoy higher stock returns, we find evidence that managers of REITs that carry more aged properties in their portfolios earn significantly higher compensation. This is consistent with agency cost associated with managerial opportunism. Furthermore, REITs that own more properties in the same locations as their headquareters and those with higher geographic concentration of properties tend to hold older properties. This finding is consistent with the hypothesis based on geographic locations of older properties. We, however, do not find evidence supporting the growth hypothesis associated with core-plus or value-add investment strategies. [ABSTRACT FROM AUTHOR]

In the knowledge economy era, innovation is the main engine that drives high-quality development of the manufacturing industry. Exploring the mechanism behind intellectual capital, its constituent elements that stimulate innovation within manufacturing enterprises, and the influence of executive motivation emerges as a crucial imperative, considering intellectual capital as the sum of intangible assets of enterprises. Unraveling this intricate interplay becomes essential in comprehending the driving forces behind innovation in this sector. Based on this, the present study analyzed the relationship between intellectual capital, executive incentives, and corporate innovation level using a sample of manufacturing companies listed in Shanghai and Shenzhen A-shares from 2012–2021. The empirical findings demonstrate the positive impact of human capital, structural capital, and relational capital on the innovation levels of manufacturing firms. Moreover, executive compensation incentives and equity incentives also contribute positively to enhancing firm innovation. Notably, these executive incentives play a vital moderating role in strengthening the relationship between intellectual capital dimensions and firm innovation. Intellectual capital dimensions have a stronger impact on innovation levels in non-state-owned manufacturing enterprises than in their state-owned counterparts. Moreover, the positive influence of intellectual capital on innovation is more significant in highly marketized regions compared to regions with lower levels of marketization. [ABSTRACT FROM AUTHOR]

In this paper, we test the "labor donation" hypothesis, which posits that intrinsically motivated individuals willingly accept lower compensation to work in nonprofit organizations (NPOs). We do so by examining the response of NPO CEO compensation to exogeneous increases in labor costs resulting from state-level minimum wage hikes, finding these increases are followed by declines in CEO compensation. Consistent with the labor donation hypothesis, we find the declines in compensation are larger for CEOs who we expect to have greater intrinsic motivation, i.e., those whose NPOs are headquartered in counties with higher levels of religiosity, in counties with greater levels of social capital, and those who work for a local NPO as opposed to a national NPO. In contrast to the decline in compensation we observe for NPO CEOs, we do not find an impact on for-profit CEO compensation. JEL Classifications: G3; J33; J38; L3; L3. [ABSTRACT FROM AUTHOR]

We examine the relation between CEO risk taking equity incentives, as captured by CEO vega, and workplace misconduct. Workplace misconduct includes health and safety violations, non-compliance with labor laws, and other violations broadly related to labor exploitation, and it results in significant economic costs. Using regression analysis, matched sample tests, and a quasi-natural experiment, we find a positive relation between CEO vega and workplace misconduct. We identify a reduction in discretionary expenses and increased employee workload as channels through which CEO vega affects workplace misconduct. JEL Classifications: G30; G32; G34. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine the effect of CEO compensation risk, as measured by the proportion of equity-based pay (option and stock awards) relative to total compensation and pay sensitivity to stock volatility, on CEO pay for luck asymmetry. This paper also empirically examines CEO compensation risk as a mediating variable between the regulatory changes and CEO pay for luck asymmetry. Design/methodology/approach: This paper test the proposed two hypothesis that CEO compensation risk is positively associated with the degree of CEO pay for luck asymmetry; and the pay related regulations implemented around 2006 could mitigate the degree of CEO pay for luck asymmetry using the fixed-effects regression models. Findings: Consistent with the managerial talent retention hypothesis, this paper finds that CEO compensation risk, as measured by the equity-based pay as a proportion of CEO total compensation and CEO pay sensitivity to stock volatility, is positively associated with the degree of CEO pay for luck asymmetry. In addition, this paper find that CEO pay for luck asymmetry is significantly reduced by the major regulatory changes on executive compensation implemented around 2006. Research limitations/implications: This study is among the very few studies exploring the impact of CEO compensation risk on pay for luck asymmetry in the literature. While the major purpose of the widely used stock options is to align executive interests and shareholder values, it also tends to increase the risk level of CEO compensation. So, a well-designed CEO pay package should protect risk-averse CEOs from bad luck for the retention purpose, which is also beneficial to shareholder wealth maximization. Therefore, future research on executive compensation needs to examine the issue from various perspectives. Practical implications: For board of directors who is responsible for the compensation of CEOs, it is necessary to consider a broad range of factors when designing an optimal CEO pay package. Social implications: The findings on the impact of regulations on CEO pay for luck asymmetry suggest that the executive-pay-related regulations around 2006 have indeed achieved some of their intended goals to significantly lower pay for nonperformance asymmetry, whereby CEO pay sensitivity to stock volatility has been identified as a major mediating variable. Originality/value: This study contributes to the literature on executive pay for luck asymmetry in several perspectives. First, this paper finds that CEO compensation risk has a positive impact on the degree of CEO pay for luck asymmetry. Second, this paper finds that the CEO pay for luck asymmetry has been mitigated after 2006 when various regulatory changes on executive compensation began to be implemented in the USA. To the best of the authors' knowledge, this study is among the very few studies investigating these issues in the literature. [ABSTRACT FROM AUTHOR]

This study examines the internal company drivers of corporate social responsibility (CSR) sophistication from a diffusion theory perspective. Bertram et al.'s (2015) framework on implementation drivers of innovations is used as our basis to operationalize the internal company drivers influencing CSR sophistication. We conduct fixed‐effects regressions on a sample of 1919 international for‐profit companies listed on the STOXX 1800 index (17,848 company years over the period 2002–2020) and explore several sub‐portfolios. This study finds that management training, board skills, CEO compensation based on total shareholder return, and quality management systems drive CSR sophistication. Management training is the strongest and most consistent driver. Our analyses show that the effects of the identified drivers are strongest for portfolios of companies with previously low CSR sophistication. Moreover, early adopters appear to be motivated to utilize CSR for both economic reasons and legitimacy. While we find that board members with a finance background improve CSR sophistication, we also show that this increase mainly stems from improving governance practices. Last, we show that CSR sophistication notably increased over time, and parallel with the per capita wealth of the country that hosts its headquarters. Overall, this study is the first to investigate the internal company drivers of non‐binary CSR sophistication using large‐scale panel data, thereby exploring the effects of early/late adoption and the individual pillars of E, S, and G. [ABSTRACT FROM AUTHOR]

Using secondary data collected as part of a national survey of nonprofit organizations, this research examines compensation outcomes of 704 nonprofit Chief Executives (CEO), integrating and social and performative aspects of governing/governance to explain compensation (in)equity. Theorizing governance as a socially complex and functionally consequential arena, we examine the impact of social categorization and identity fit between CEO Ethno-Racial Demography and Board Ethno-Racial Variety prior to overlaying the influence of three forms of governance activity: Fiduciary Oversight, Internal Awareness, and External Engagement. We employ serial multiple mediation regression analysis to test direct and indirect effects of demographic diversity and governance activity for nonprofit CEO compensation outcomes. We found compensation of ethno-racialized CEOs is higher when their organizations have diverse boards. Therefore, boards of directors must be cognizant of board composition, the potential for subjectivity and bias, and the impact these factors can have on CEO compensation and compensation equity. [ABSTRACT FROM AUTHOR]

This paper investigates qualitatively the involvement of Human Resources (HR) professionals in executive remuneration governance within large UK public companies and similar organisations, considering the complex interplay of institutional, social and cognitive factors that influence executive pay decisions. Through interviews with senior HR professionals and focus groups involving mid-ranking HR professionals, the study identifies key themes, challenges and opportunities faced by HR in navigating the executive remuneration landscape. The study contributes to a more nuanced understanding of the sociological and psychological dimensions of executive pay governance. The findings highlight the practical implications for HR professionals, emphasising the need for active engagement with diverse stakeholder groups, fostering a culture of openness and transparency to ensure that executive pay practices and associated processes align with organisational values and societal expectations, while underscoring the value of learning from diverse perspectives and practices. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to explore the modalities for the curtailment of expropriation of investment in the course of implementation of the African Continental Free Trade Area (AfCFTA) Agreement and to ensure that the African capital markets contribute robustly to economic growth. Design/methodology/approach: The paper relies on the doctrinal approach to assess the state of play and the prospects for the future. Findings: The paper found that African capital markets are fragmented and continue to suffer from poor investor protection which lowers market confidence. Originality/value: The paper offers new insights on the regulatory approaches to foster investor protection in light of the emergence of the AfCFTA, regulation of executive compensation and need for harmonization of best practices across African markets. [ABSTRACT FROM AUTHOR]

This article examines how CEO compensation structure and CEO gender were associated with corporate social responsibility (CSR) performance in U.S. firms in the period between 2003 and 2013. Building on prior research in economics, finance, accounting, and management, which suggests gender differences in commitment to CSR, this study provides empirical evidence that female CEOs were positively associated with higher CSR performance. The analysis further shows that a higher proportion of equity in CEO compensation was positively associated with CSR, whereas higher proportions of cash bonuses and long-term incentive plans were negatively associated with CSR. Notably, a higher proportion of a cash bonus in CEO compensation further reduced CSR in firms led by female CEOs. These findings offer valuable insights for firms seeking to design executive compensation packages that align CEO behavior with the firms' CSR objectives. This study contributes to the growing body of literature on CSR by providing empirical evidence on the role of CEO gender and compensation structure. [ABSTRACT FROM AUTHOR]

Purpose: Agency theory motivated this study, posing that leverage mitigates the agency problem. The aim was to examine whether leverage influences the relationship between executive-employee pay gaps (EEPGs) and firm performance. The study was conducted in the mining and retail sectors between 2012 and 2021. Design/methodology/approach: Two EEPGs were featured based on their executive fixed pay and variable incentives accumulation. Proxies of firm performance were headline earnings per share; return on assets; earnings before interest, tax, depreciation and amortisation; and return on stock price. Data were collected from 76 JSE-listed firms in the retail and mining sectors and analysed using the two-step generalised method of moments. Findings: The results revealed the hybrid implication of the pay gap for firm performance in the retail and mining sectors of South Africa, depending on the performance measures emphasised. More importantly, the study shows that with the moderating effects of leverage, firms can improve their performance while shrinking the pay gap. Practical implications: The results have implications for policy addressing income inequality, debt management, executive compensation and regulatory reforms in South Africa concerning productivity and remuneration decisions. Originality/value: The article provides specific literature for retail and mining industries on pay gaps, shows that it is possible to reduce the pay gap without compromising performance and suggests a new measure of performance that is more attuned to pay gap effect measurement. [ABSTRACT FROM AUTHOR]

Purpose: This study examines the role of corporate governance on corporate tax avoidance from the developing country perspective of Malaysia. Design/methodology/approach: A sample of 318 firm-year observations from 2016 to 2020 from the 100 largest listed companies in Malaysia was analysed using a fixed effects panel least squares regression model. Findings: CEOs play a significant role in corporate tax avoidance in Malaysia. Specifically, they are motivated by money and power to engage in risky tax avoidance activity. It was also found that corporate governance mechanisms related to the board of directors have a limited effect on companies' tax compliance issues. Practical implications: This study's findings can help regulators and policymakers understand the circumstances leading to increased tax aggressiveness as well as the limitations of certain governance mechanisms in curbing tax avoidance activity within companies. The findings can also assist shareholders and investors in formulating internal policies to create better alignment of their interests with those of management. The unique emerging economy evidence and insights from this study advance knowledge and can inspire fellow researchers in their future studies. Originality/value: This study differs from most prior studies by examining the governance and tax issue from a developing country perspective, that of Malaysia. Developments in the country's corporate governance framework and tax landscape in recent years make it relevant and interesting to investigate the issue in this emerging economy. Offering unique empirical evidence and insights from an emerging economy viewpoint, and with findings that may be generalised to other emerging economies sharing similar market traits (particularly ASEAN nations), this study enriches and extends the existing literature. [ABSTRACT FROM AUTHOR]

This research examines how option trading activity reduces information asymmetry through the CEO's and ordinary employee's awareness of firm value and their pay related to firm performance. Our findings demonstrate that companies with more options trading activity have a higher CEO-employee pay ratio, which is consistent with the tournament theory. Option trading illustrates that both CEOs and employees understand their relevant payment based on the precise firm value. This advantage of option trading becomes weak for firms with higher profitability, for employees with more bargaining power, and for CEOs with a higher risk incentive. [ABSTRACT FROM AUTHOR]

In this study, we investigate whether CEO inside debt, a compensation mechanism designed to align managers' and debtholders' interests, plays a role in facilitating firms' ability to secure higher trade credit from their suppliers. We argue that CEO inside debt offers heightened assurance to trade creditors, resulting in their greater willingness to extend higher levels of trade credit. Firms perceive this as a favourable source of short-term financing compared to traditional bank financing due to its cost-effectiveness and considerably lower barriers to access. Contrary to the previous studies, our empirical analysis encompassing a sample of non-financial firms in the United States reveals a significant positive relationship between CEO inside debt and firms' ability to secure trade credit. This confirms our assertion that trade credit suppliers' increased willingness to accept a higher level of risk is driven by the confidence instilled by the CEO inside debt holdings. Furthermore, we show that this relationship is significantly stronger in financially constrained firms, where it serves as a critical assurance mechanism for suppliers of trade credit. Suggesting that CEO inside debt play a key role in sustaining financially constrained firms that are typically neglected by formal lending institutions. [ABSTRACT FROM AUTHOR]

Purpose: The research objective of this article was to analyze and evaluate the formation of the relationship between the salaries of those who make up the management body of manufacturing companies. Design/methodology/approach: The study used selected statistical methods to achieve the purpose of the study and to verify the research hypothesis. Measures of descriptive statistics allowed comparison of CEO salary and average board member salary. Spearman's rho correlation coefficient was used to determine the strength of the relationship between these quantities. The quotient between CEO compensation and average board member compensation was used to determine the inequality that exists. The Kruskal-Wallis test, on the other hand, was used to diagnose differences between the populations of manufacturing companies in the levels of inequality in CEO-member compensation. Findings: The analyses conducted achieved the intended purpose of the study and verified the research hypothesis. It was observed that the compensation of the CEO and board members is the least unequal in high-tech companies. It was diagnosed that the inequality of remuneration along the CEO-board member line is the smallest in the group of high-technology enterprises. Thus, there are no grounds to reject the research hypothesis. Research limitations/implications: A difficulty and limitation of salary surveys is obtaining complete information about them. This is due to the nature of this type of data, which is subject to legal protection. The research carried out in this article is based on information about the salaries of people employed in the management bodies of public companies. In further work, attempts will be made to study inequalities in entities that are not listed on the Warsaw Stock Exchange. Social implications: The study indicates which group of manufacturing enterprises should be supported by the state to reduce excessive vertical wage inequality. Originality/value: The originality of the study stems from the fact of examining the relationship occurring between CEO and board member salaries and their inequality. Previous analyses have focused on the relationship occurring between - on the one hand - those employed in management bodies and - on the other hand - operational employees. [ABSTRACT FROM AUTHOR]

Purpose: Based on stakeholder, agency and institutional theory, this study aims to examine the role of institutional ownership in the relationship between environmental, social and governance practices and CEO compensation. Design/methodology/approach: Utilizing a fixed-effect panel regression analysis, this research utilized a panel data approach, analyzing data spanning from 2014 to 2021, focusing on US companies listed on the S&P500 stock market index. The dataset encompassed 219 companies, leading to a total of 1,533 observations. Findings: The analysis identified that environmental scores significantly impact CEO equity-linked compensation, unlike social and governance scores. Additionally, it was found that institutional ownership acts as a moderating factor in the relationship between the environmental score and CEO equity-linked compensation, as well as the association between the social score and CEO equity-linked compensation. Interestingly, the direction of these moderating effects varied between the two relationships, suggesting a nuanced role of institutional ownership. Originality/value: This research makes a unique contribution to the field of corporate governance by exploring the relatively understudied area of institutional ownership's influence on the ESG practices–CEO compensation nexus. [ABSTRACT FROM AUTHOR]

We examine the impact of non‐controlling shareholder activism on the effectiveness of executive compensation contract, particularly focusing on the over‐appointment of directors in A‐share firms listed on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2021. We discover that such over‐appointments by non‐controlling shareholders significantly promote executive pay‐for‐performance sensitivity of these enterprises. This effect becomes even more pronounced in enterprises that display a weaker government intervention and media attention. Further mechanism analysis indicates that over‐appointments improve the effectiveness of compensation contract by improving the quality of accounting information and restraining executives' opportunistic behaviour. Our further research finds that over‐appointments by non‐controlling shareholders can effectively reduce executive compensation stickiness, while significantly increasing the absolute salary level of executives. There is no evidence to suggest that independent directors increase executive pay‐for‐performance sensitivity. [ABSTRACT FROM AUTHOR]

This study uses agency theory to examine how board size, compensation committee, and CEO duality align the pay-performance relationship with long-term sustainability performance. We examined companies from nine Asian emerging economies with a sustainability score greater than 0.50 between 2010 and 2019. The findings support the pay-performance relationship proposed by agency theory in the presence of a robust governance structure. The relationship is more significant in firms with high ESG scores. Our study claimed that the compensation committee has a significant role in aligning sustainability objectives with CEO compensation, which improves the firm's market and financial performance. However, board size has no discernible impact on the CEO pay-performance relationship. CEO duality negatively affects this alignment since the CEO misuses their power to influence the compensation committee's role in tying sustainability agendas with the CEO's pay performance framework. Furthermore, CEO compensation is significantly impacted by firm size, which is justified by the complexity and increased responsibilities associated with managing larger firms. Conclusively, this investigation suggests that the inconclusive evidence on CEO compensation around the world should be studied with governance mechanisms. This study advances knowledge of agency theory and the connection between sustainability performance and compensation. The findings of the study highlight the role of governance structure in aligning executive compensation with sustainability to improve long-term performance. These findings suggest policymakers promote strong governance mechanisms that reduce the CEO's power to influence the board and enhance the independence of the compensation committee to independently design the executive compensation package essential for aligning executive pay with sustainability performance. [ABSTRACT FROM AUTHOR]

This study empirically examines the relationship between non‐executive directors and corporate risk‐taking. The findings show that non‐executive directors could significantly improve the risk‐taking level of corporations. Non‐executive directors reduce corporate agency costs and alleviate financing constraints, thus promoting a corporation's risk‐taking level. Further research shows that the positive impact of non‐executive directors on corporate risk‐taking is weakened by being state‐owned, higher executive incentives, better external supervision, higher ownership concentration, higher management age and greater uncertainty in the external environment. Additionally, non‐executive directors appointed by both controlling and non‐controlling shareholders play a positive role in promoting corporate risk‐taking. [ABSTRACT FROM AUTHOR]

Tax reforms have a profound impact on corporate compensation. While existing research has extensively examined the effects of tax cuts and breaks on corporate compensation, the relationship between tax refunds and executive compensation remains largely unexplored. To address this gap, this paper employs a difference-in-differences approach to investigate the causal effect of China's value-added tax credit refund policy on executive compensation. The findings reveal that the tax refund policy increases executive compensation, primarily by enhancing net income, which lays the financial foundation for higher executive compensation. These effects also exhibit heterogeneity across corporate regions, life cycle stages, ownership structures, and executive categories. This paper is the first to explore the relationship between tax refunds and executive compensation, providing valuable insights into how external tax policies influence corporate internal incentive structures. [ABSTRACT FROM AUTHOR]

A line of research documents that corporate executives' compensation convexity relates to earnings management, the issuance of management earnings forecasts and firms' investing and financing decisions. Another stream of research demonstrates that executives manage earnings expectations downward to beatable levels. We bridge these lines of research by investigating how CEO compensation convexity affects expectation management, an important earnings reporting strategy. We hypothesise and find that compensation convexity plays an important role in inducing CEOs to adopt a meet‐or‐just‐beat earnings reporting strategy, which is implemented by downward expectation management. [ABSTRACT FROM AUTHOR]

I develop two empirical models to quantify agency friction caused by moral hazard in top management teams. They capture shareholders' distinct perspectives on compensating top managers: the Individual Model, in which managers in a firm unilaterally shirk, and the Team Model, in which managers choose effort jointly. The Team Model rationalizes observed compensation better than the Individual Model, underlining the importance of managerial coordination and team-based incentives. This paper also offers novel estimates of agency friction in a team production setting. Risk premium explains a large portion of the pay differential across and within firms. Firm value would have dropped between 4% and 15% if managers shirked. Additional counterfactual estimation suggests that shareholders could reduce the total compensation by up to $17 million if they were to switch from the individual perspective to the team perspective. This paper was accepted by Shivaram Rajgopal, accounting. Funding: This work was supported by the Professional Staff Congress and the City University of New York (PSC-CUNY) [Grant 67780-00 45]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2024.4982. [ABSTRACT FROM AUTHOR]

This study examines whether incentive contracts that compares managers' compensation to that of stronger peers can influence voluntary disclosure behaviour and improve transparency. We obtain information regarding peer-based compensation arrangements from US public firms and find that managers whose compensation is benchmarked against peers who, on average, have higher managerial abilities, tend to issue management earnings forecasts more frequently. Furthermore, the peer comparison incentive effects are more pronounced when firms depend more on external financing, face greater product market threats, and have more endowed growth opportunities. Overall, our study highlights the effects of pressure arising from comparison with higher-quality peers on firms' information environment. We contribute to the literature on tournament-based implicit incentives, peer effects, managerial ability, and economic consequences in the context of voluntary disclosures. [ABSTRACT FROM AUTHOR]

We analyze a principal‐agent model in which an effort‐averse agent can manipulate a publicly observable performance report. The principal cannot observe the agent's cost of effort, her effort choice, and whether she manipulated the report. An optimal contract links compensation to the realized output and the (possibly manipulated) report. Manipulation can be beneficial to the principal because it can make the report more informative about the agent's effort choice, thereby reducing the agent's information rent. This is achieved through a contract that incentivizes the agent to selectively engage in manipulation based on her effort choice. [ABSTRACT FROM AUTHOR]

Competition law infringements have been theorised to be a consequence of flawed monitoring by the board of directors. The focus of European Union competition law on sanctioning undertakings, rather than individuals, offers a particularly interesting context to empirically test this theory. The study uses agency theory for this purpose to analyse the relationship between a number of characteristics of the board of directors and European Union competition law infringements. It encompasses all listed undertakings that have committed a European Union competition law infringement since 2003, irrespective of their nationality. After controlling for temporal, geographic and industry-related effects, it finds that both CEO/Chair duality and gender diversity are associated with an increased likelihood of committing an EU competition law infringement. No relationship was found between European Union competition law infringements and the ratio of non-executive directors, the ratio of directors appointed after the CEO, board tenure, CEO tenure, CEO compensation or the size of the board. The results indicate that future governance initiatives aimed at increasing gender diversity and separating the functions of CEO and chairperson might also be relevant for competition law policy. [ABSTRACT FROM AUTHOR]

We analyze the optimal design of deferred compensation for bank executives under agency conflicts in a continuous time model with a bank liability structure. Our model demonstrates that a well‐designed deferred compensation contract can effectively mitigate bank executives' asset substitution problem and significantly enhance the total value of the bank, which aligns with existing empirical studies. Moreover, we find that the motivation for bank executives to shift risk under deferred compensation is diminished when supervision is more stringent, the bank has greater market power, or the write‐down ratio of debt is lower. [ABSTRACT FROM AUTHOR]

This paper examines the properties of accounting numbers used in compensation contracts for S&P 500 firms from 2006 to 2017. Our data reveal wide variation in the accounting performance metrics used in compensation contracts, with some recent movement from bottom-line earnings-based measures to top-line measures. Investigating specific exclusions made to GAAP-based financial measures to arrive at realized compensation performances, we identify 27 different types of exclusions and document significant heterogeneity in tailoring across firms. We test whether exclusions are made to remove noise in performance measures and better isolate managerial effort (efficient contracting theory) or to camouflage managerial rent extraction (managerial power theory). We find evidence consistent with both explanations. [ABSTRACT FROM AUTHOR]

Based on the recent SEC-mandated disclosures of CEO-worker pay ratios, we find that firms significantly decrease (increase) their CEO-worker pay ratios when their prior pay ratios are high (low) relative to peers. More importantly, the decrease in pay ratio among high pay ratio firms is significantly more pronounced with stronger stakeholder influences, proxied by employees with greater bargaining power, communities with higher social capital, and states with more stringent minimum wage legislation. These results are robust to controlling for CEO and median worker pay benchmarking as well as the influences of shareholders. Using state-level pay ratio tax proposals as another proxy for stakeholder influence, we find high pay ratio firms in states with these proposals reduce pay ratios significantly more than firms with similar high pay ratios in other states. Overall, our results highlight the influence of corporate stakeholders in mitigating high CEO-worker pay gap. [ABSTRACT FROM AUTHOR]

Preventing and controlling the risk of enterprise default is an important way to maintain financial stability. When mitigating and adapting to climate change, it is important to study whether climate transition risk affects the probability of enterprise default. This article systematically analyzes data for Chinese‐listed companies from 2000 to 2019 and finds that climate transition risk significantly increases enterprise default probability (EDF). In addition, pilot carbon emission trading schemes and national carbon emission trading increase this effect. Financing constraints and profitability act as transmission channels; the transmission path, in turn, is influenced by the enterprise environment, social, and governance (ESG) factors and executive compensation. Excellent enterprise ESG performance can lower the positive impact of climate transition risk on EDF. However, higher executive compensation has the opposite effect: high compensation is associated with higher risk. When considering different business types, climate transition risk is more likely to increase the default probability of small assets or non‐state‐owned enterprises. This study helps describe the internal relationship between climate transition risk and EDF, and provides insights to better prevent and address the problem of enterprise debt default caused by climate transition risk. [ABSTRACT FROM AUTHOR]