We analyze the influence of firm and managerial characteristics on executive compensation. Consistent with theory, we find monitoring difficulties result in greater use of options while CEO and blockholder ownership result in less. Risky investment is positively related to options and negatively related to cash bonus and restricted stock, suggesting that firms use options to encourage managers to take risks. We find a negative (positive) relation between options and leverage (convertible debt) consistent with minimizing the agency costs of debt. Finally, we provide new evidence on managerial horizon and incentives, documenting a concave relation between cash bonus and CEO age.

We examine 121 reverse takeovers (RT), in which a privately held firm acquires a publicly traded firm to obtain their exchange listing. The public firms, many of which went public during the initial public offering (IPO) bubble, are generally poor performers. Their shareholders receive significant wealth gains upon announcement, suggesting that these events may provide shareholders of distressed firms a way to recover some of their investment. We observe little post-event improvement in operations or profitability, and only 46% of the sample survives two years. Thus, while reverse takeovers provide alternative means of going public, they are risky and may fail to generate long-term wealth.