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MANAGING WITH STYLE: THE EFFECT OF MANAGERS ON FIRM POLICIES
, 2003
"... This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-firm matched panel data set which enables us to track the top managers across different firms over time. We find that manager fixed effects matter for a wide range of corpora ..."
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Cited by 251 (7 self)
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This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-firm matched panel data set which enables us to track the top managers across different firms over time. We find that manager fixed effects matter for a wide range of corporate decisions. A significant extent of the heterogeneity in investment, financial and organizational practices of firms can be explained by the presence of manager fixed effects. We identify specific patterns in managerial decision making that appear to indicate general differences in “style” across managers. Moreover, we show that management style is significantly related to manager fixed effects in performance and that managers with higher performance fixed effects receive higher compensation and are more likely to be found in better governed firms. In a final step, we tie back these findings to observable managerial characteristics. We find that executives from earlier birth cohorts appear on average to be more conservative; on the other hand, managers who hold an MBA degree seem to follow on average more aggressive strategies.
Executive Pay and Performance Evidence from the U.S. Banking Industry
- Journal of Financial Economics
, 1995
"... This paper examines CEO pay in the banking industry and the effect of deregulating the market for corporate control. Using panel data on 147 banks over the 1980s we find higher levels of pay in competitive corporate control markets, i.e., those in which interstate banking is permitted. We also find ..."
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Cited by 122 (3 self)
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This paper examines CEO pay in the banking industry and the effect of deregulating the market for corporate control. Using panel data on 147 banks over the 1980s we find higher levels of pay in competitive corporate control markets, i.e., those in which interstate banking is permitted. We also find a stronger pay-performance relation in deregulated interstate banking markets. Finally, CEO turnover increases substantially after deregulation. These results provide evidence of a managerial talent market- one which matches the level and structure of pay with the competitiveness of the banking environment.
Financial accounting information, organizational complexity and corporate governance systems
- Journal of Accounting and Economics
, 2004
"... We posit that limited transparency of firms ’ operations to outside investors increases demands on governance systems to alleviate moral hazard problems. We investigate how ownership concentration, directors ’ and executive’s incentives, and board structure vary with: 1) earnings timeliness, and 2) ..."
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Cited by 63 (1 self)
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We posit that limited transparency of firms ’ operations to outside investors increases demands on governance systems to alleviate moral hazard problems. We investigate how ownership concentration, directors ’ and executive’s incentives, and board structure vary with: 1) earnings timeliness, and 2) organizational complexity measured as geographic and/or product line diversification. We find that ownership concentration, directors ’ and executives ’ equity-based incentives, and outside directors’ reputations vary inversely with earnings timeliness, and that ownership concentration, and directors’ equity-based incentives increase with firm complexity. However, board size and the percentage of inside directors do not vary significantly with earnings timeliness or firm complexity.
CEO compensation and incentives: Evidence from M&A bonuses.
- Journal of Financial Economics,
, 2004
"... Abstract We investigate CEO compensation for completing M&A deals. 39% of the acquiring firms in our sample state that they compensate their CEOs for completing the deal, and that the compensation comes mainly in the form of a cash bonus. We find that CEOs who have more power to influence board ..."
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Cited by 61 (2 self)
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Abstract We investigate CEO compensation for completing M&A deals. 39% of the acquiring firms in our sample state that they compensate their CEOs for completing the deal, and that the compensation comes mainly in the form of a cash bonus. We find that CEOs who have more power to influence board decisions receive significantly larger bonuses. We also find a positive relation between bonus compensation and measures of effort, but not between bonus compensation and deal performance. CEOs with more power also tend to engage in larger deals relative to the size of their own firms, and the market responds more negatively to their acquisition announcements. Our evidence is consistent with the argument that managerial power is the primary driver of M&A bonuses. JEL Classification: G34; J33 Key Words: CEO Compensation, Mergers and Acquisitions We gratefully acknowledge the insightful comments and suggestions made by an anonymous referee,
Why Has CEO Pay Increased So Much
- Quarterly Journal of Economics
, 2008
"... This paper develops a simple equilibrium model of CEO pay. CEOs have different talents and are matched to firms in a competitive assignment model. In market equilibrium, a CEO’s pay depends on both the size of his firm and the aggregate firm size. The model determines the level of CEO pay across fir ..."
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Cited by 35 (2 self)
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This paper develops a simple equilibrium model of CEO pay. CEOs have different talents and are matched to firms in a competitive assignment model. In market equilibrium, a CEO’s pay depends on both the size of his firm and the aggregate firm size. The model determines the level of CEO pay across firms and over time, offering a benchmark for calibratable corporate finance. We find a very small dispersion in CEO talent, which nonetheless justifies large pay differences. In recent decades at least, the size of large firms explains many of the patterns in CEO pay, across firms, over time, and between countries. In particular, in the baseline specification of the model’s parameters, the sixfold increase of U.S. CEO pay between 1980 and 2003 can be fully attributed to the sixfold increase in market capitalization of large companies during that period. I.
Internal Capital Markets and Firm-Level Compensation Incentives for Division Managers
- Journal of Labor Economics
"... Do multidivisional firms structure compensation contracts for division managers to mitigate incentive problems in their internal capital markets? I find evidence that compensation and investment incentives are substitutes: firms providing a stronger link to firm performance in incentive compensatio ..."
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Cited by 14 (0 self)
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Do multidivisional firms structure compensation contracts for division managers to mitigate incentive problems in their internal capital markets? I find evidence that compensation and investment incentives are substitutes: firms providing a stronger link to firm performance in incentive compensation for division managers also provide weaker investment incentives through the capital budgeting process. Specifically, as the proportion of incentive pay for division managers that is based on firm performance increases, division investment is less responsive to division profitability. These findings are generally consistent with a model of influence activities by division managers in interdivisional capital allocation decisions.
The cost of pride: why do firms from developing countries bid higher
- Journal of International Business Studies
, 2011
"... Using an extensive panel of cross-border M&A transactions between 1990 and 2007, we find that firms from developing countries (versus those from developed countries) bid higher on average to acquire assets in developed countries. We are interested in why these higher bids occur. We find that bid ..."
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Cited by 12 (0 self)
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Using an extensive panel of cross-border M&A transactions between 1990 and 2007, we find that firms from developing countries (versus those from developed countries) bid higher on average to acquire assets in developed countries. We are interested in why these higher bids occur. We find that bids of firms from developing countries are higher in cases where the transaction displays “national pride ” characteristics, where national pride is identified through a manual examination of media articles. While other factors may also influence these higher bids, we find that the role of national pride is robust across a number of specifications and control variables. These results highlight a source of pride beyond personal hubris which potentially influences corporate decision makers.
Managerial Turnover in a Changing World
"... We characterize a …rm’s pro…t-maximizing turnover policy in an environment where managerial productivity changes stochastically over time and is the managers’private information. Our key positive result shows that the productivity level that the …rm requires for retention declines with the managers’ ..."
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Cited by 10 (3 self)
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We characterize a …rm’s pro…t-maximizing turnover policy in an environment where managerial productivity changes stochastically over time and is the managers’private information. Our key positive result shows that the productivity level that the …rm requires for retention declines with the managers’tenure in the …rm. Our key normative result shows that, compared to what is e ¢ cient, the pro…t-maximizing policy either induces excessive retention (i.e., ine ¢ ciently low turnover) at all tenure levels, or excessive …ring at the early stages of the relationship followed by excessive retention after su ¢ ciently long tenure. JEL classi…cation: D82
2002. “Geographic and Industrial Corporate Diversification: The Level and Structure of Executive Compensation
- Journal of Accounting, Auditing and Finance
"... We explore the relation between corporate diversijication and CEO com-pensation. We document that geographic diversijication provides a com-pensation premium, while industrial diversijication is associated with lower levels of CEO pay. We also examine the effect of corporate diver-sijication on the ..."
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Cited by 8 (0 self)
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We explore the relation between corporate diversijication and CEO com-pensation. We document that geographic diversijication provides a com-pensation premium, while industrial diversijication is associated with lower levels of CEO pay. We also examine the effect of corporate diver-sijication on the structure and performance criteria of CEO compensation contracts. We find that both diversijication strategies are associated with a greater use of incentive-based compensation and with a greater reliance on market-based, rather than accounting-based measures of Jirm pe rform-ance. Finally, we address the question of whether shareholders reward CEOs for corporate diversijication. We document that while value-enhancing geographic diversijication is rewarded, non-value-enhancing industrial diversijication is penalized. 1.
