Agency theory suggests that high pay-performance sensitivity (PPS) of CEO's compensation is an important motivation mechanism to the CEO to improve corporate performance. We develop a simple model that suggests that reverse causality should also be considered. Specifically, our model predicts...

Remuneration consultants are an integral part of the process of determining executive pay in large listed companies. This paper discusses the role of the consultants in the United Kingdom, United States and Canada, analyses their industry and the factors currently affecting it, and summarizes...

Corporate governance systems exist to discourage self-interested behavior. One question that is often overlooked is how extensive these systems should be. A look at corporate governance today suggests that self-interest is high because companies are compelled - by regulators and the market - to...

Financial strategy is about how companies raise funds and manage them within their organizations. Corporate governance is relevant to both of these aspects, and an understanding of corporate governance is vital for an appreciation of corporate finance. This chapter from Corporate Financial...

In the wake of the backdating scandal, many firms began awarding options at scheduled times each year. Scheduling option grants eliminates backdating, but creates other agency problems. CEOs that know the dates of upcoming scheduled option grants have an incentive to temporarily depress stock...

Executive compensation serves as a metric by which investors measure the quality of a firm's governance. In this paper, I explore how the signaling role of executive compensation impacts the compensation decisions of boards. I show that reputational concerns often cause boards to adopt pay...

This paper provides evidence on how executive compensation relates to firm performance in listed firms in China. Using comprehensive financial and accounting data on China's listed firms from 1998 to 2002, augmented by unique data on executive compensation and ownership structure, we find for...

This paper provides the first rigorous econometric estimates on the pay-performance relations for executives of Korean firms with and without Chaebol affiliation. To do so, we have assembled for the first time panel data (that provide information not only on executive compensation and firm...

This paper finds that CEO stock options influence the choice, amount, and timing of funds distributed as a buyback. These results favor a managerial opportunism motive for buybacks over other theories and support two key research expectations - that buybacks impose option-induced agency costs on...

Asset owners (principals) typically do not manage their own investments and leave this job to delegated managers (agents). What is best for the asset owner, however, is usually not best for the fund manager. Additional agency conflicts arise when the asset owner does not know the quality and...