A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.

  • Topic classification is ongoing.
  • Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.

Your search

Topic

Results 12 resources

  • Corporations have been criticized for providing executives with excessive incentives to focus on short-term performance. This paper shows that investment in short-term projects has beneficial effects in that it provides early feedback about Chief Executive Officer (CEO) talent, which leads to more efficient replacement decisions. Due to the threat of CEO turnover, the optimal design of stock option vesting conditions in executive compensation is more subtle than conventional views suggest. For example, I show that long vesting periods can backfire and induce excessive short-term investments. The study generates new empirical predictions regarding the determinants and impacts of stock option vesting terms in optimal contracting.

  • We provide evidence that creditors play an active role in the governance of corporations well outside of payment default states. By examining the Securities and Exchange Commission's filings of all U.S. nonfinancial firms from 1996 through 2008, we document that, in any given year, between 10% and 20% of firms report being in violation of a financial covenant in a credit agreement. We show that violations are followed immediately by a decline in acquisitions and capital expenditures, a sharp reduction in leverage and shareholder payouts, and an increase in CEO turnover. The changes in the investment and financing behavior of violating firms coincide with amended credit agreements that contain stronger restrictions on firm decision-making; changes in the management of violating firms suggest that creditors also exert informal influence on corporate governance. Finally, we show that firm operating and stock price performance improve post-violation. We conclude that actions taken by creditors increase the value of the average violating firm.

Last update from database: 6/11/24, 11:00 PM (AEST)