We predict and find that firms use annual grants of options and restricted stock to CEOs to manage the optimal level of equity incentives. We model optimal equity incentive levels for CEOs, and use the residuals from this model to measure deviations between CEOs' holdings of equity incentives...

The acceleration of globalization combined with rapid advances in technology and the growing importance of the Internet have led many researchers and practitioners to suggest that a quot;New Economyquot; has evolved in which equity valuation is different than in previous periods. We examine the...

We evaluate the influence of measurement error in analysts' forecasts on the accuracy of implied cost of capital estimates from various implementations of the 'implied cost of capital' approach, and develop corrections for the measurement error. The implied cost of capital approach relies on...

We re-examine the claim that many corporations are underleveraged in that they fail to take full advantage of debt tax shields. We show prior results suggesting underleverage stems from biased estimates of tax benefits from interest deductions. We develop improved estimates of marginal tax rates...

We develop an algorithm that mimics the relative performance evaluation (“RPE”) peer selection process used for CEOs’ incentive plans. Our algorithm constructs the portfolio of peer firms that exhibits the highest in-sample stock performance correlation with the focal firm, which we then...

Bowen, Ragjopal, and Venkatachalam (2008) explore whether managers, on average, use accounting discretion for reporting objectives that are in the interests of shareholders (e.g., signaling, tax minimization, etc.), or alternatively whether managers use discretion opportunistically in the...

Considerable research has documented the role of debt covenants and conservative financial accounting in addressing agency conflicts between lenders and borrowers. Beatty, Weber and Yu (BWY, 2008) document interesting, but mixed, findings on the relation between debt covenants and conservative...

Stock and option compensation and the level of managerial equity incentives are aspects of corporate governance that are especially controversial to shareholders, institutional activists, and governmental regulators. Similar to much of the corporate finance and corporate governance literature,...

We investigate Gompers, Ishii, and Metrick's (2003) finding that firms with weak shareholder rights exhibit significant stock market underperformance. If the relation between poor governance and poor returns is causal, we expect that the market is negatively surprised by the poor operating...