The relationship between exorbitant chief executive officer (CEO) compensation and weak performance has been widely criticised as an abuse of managerial power and the intrusion of agency problems. This study examines whether the agency problem of free cash flow (FCF), identified by Jensen...

While the literature appeals to efficiency arguments from agency theory to explain the relative rise of CEO equity compensation, prior work has given less focus to CEO pay contracts based on equity and cash incentives that directly (analytically) maximize the total return of firm owners. The...

We investigate an emerging pay-performance activism under a natural setting of performance-focused shareholder proposals rule (PSPs) (Rule 14a-8) established by the Securities and Exchange Commission (SEC) for top management compensation. We find that: (1) PSP sponsors successfully identify...

Managers with higher risk incentives (greater options vega) issue less readable disclosures. Those in the top-quartile of vega file annual reports that are about 15.4% more voluminous than the filings of bottom-quartile-vega managers. The effect of vega on obfuscation remains after controlling...

This study uses the 2008 mortgage crisis to demonstrate how the relationship between vertical integration and performance crucially depends on corporate governance. Prior research has argued that the vertical integration of mortgage origination and securitization aligned divisional incentives...

The principal management theoretical lenses for examining leveraged buyouts have been the agency theory and information asymmetries. Occasionally a wider number of theories and concepts have been invoked, such as the parenting advantage, the resource-based view, and the market for corporate...

In recent years there have been two parallel discussions taking place in the US and in the UK about the role which institutional shareholders should play in governing the corporation. In the US this discussion is around the idea of shareholder empowerment, in the UK it is around shareholder...

This paper explores the impact of target CEOs' retirement preferences on takeovers. Using retirement age as proxy for CEOs' private merger costs, we find strong evidence that target CEOs' preferences affect merger activity. The likelihood of receiving a successful takeover bid is sharply higher...

Relative performance evaluation (“RPE”) is a useful tool for shielding risk averse agents from systematic uncertainty. However, RPE can also destroy firm value by encouraging executives to implement excessively aggressive product market strategies to improve their relative standing through...

Japanese corporate governance reform is implemented by an introduction of corporate governance code and stewardship code, in which stewardship activities by institutional investors play an important role in terms of reduction of agency cost. In this report, stewardship activities are focused...