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Article
Publication date: 1 March 2015

Nina T. Dorata and Cynthia R. Phillips

This study examines the impact of school-district governance characteristics, which include board and management entrenchment and budget and audit committee expertise, on…

Abstract

This study examines the impact of school-district governance characteristics, which include board and management entrenchment and budget and audit committee expertise, on fiscal measures. Despite the significant influence school boards have over the determination and use of the bulk of property taxes, virtually no empirical research exists that examines the influence of school-district governance structures on fiscal outcomes. We find a positive association between board entrenchment and spending and find a negative association between budget and audit committee expertise and spending. The findings of this study confirm that governance structure matters for fiscal outcomes and recommendations are provided to support efforts to improve fiscal efficiency of school-district governance.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 27 no. 3
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 11 April 2008

Nina T. Dorata and Steven T. Petra

This study seeks to examine whether CEO duality further exacerbates CEOs' motivation of self‐interest to engage in mergers and acquisitions to increase their compensation.

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2820

Abstract

Purpose

This study seeks to examine whether CEO duality further exacerbates CEOs' motivation of self‐interest to engage in mergers and acquisitions to increase their compensation.

Design/methodology/approach

Regression tests using CEO compensation as the dependent variable, and CEO duality, firm size and firm performance as independent test and control variables. The regression tests are used for various sub‐samples of the firms, those that merge and those that have CEO duality.

Findings

The results indicate that for merging firms CEO compensation is positively associated with firm size. However, this association is unaffected by CEO duality. For non‐merging firms, the results indicate that CEO compensation is positively associated with firm size and firm performance. CEO duality moderates the positive association between CEO compensation and firm performance.

Research limitations/implications

This study is limited to the extent that it does not observe the deliberations of compensation committees in their setting of CEO compensation, but only examines the outcomes of those deliberations. A future area of research is to examine compensation schemes of merger/acquisition CEOs in the context of other government structures, such as board independence and composition.

Practical implications

Shareholders who desire to keep CEO compensation levels positively associated with firm performance may consider supporting the separation of the positions of CEO and Chairperson of the Board.

Originality/value

This study contributes to the literature by concluding that governance structure influences CEO compensation schemes and CEOs of merging firms command higher compensation in spite of governance structure and firm performance.

Details

Managerial Finance, vol. 34 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 11 April 2008

Nina T. Dorata

This study aims to examine whether CEO compensation is shielded from the negative effects of restructuring charges and asset impairments following the acquisition of the…

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1320

Abstract

Purpose

This study aims to examine whether CEO compensation is shielded from the negative effects of restructuring charges and asset impairments following the acquisition of the controlling interest in the stock of another corporation.

Design/methodology/approach

Regression tests using CEO cash compensation as the dependent variable, and restructuring charges, goodwill impairments, and other asset impairments associated with a target firm as independent test and control variables.

Findings

The results indicate that CEO cash compensation is increased when an acquiring firm with respect to the target firm records restructuring charges. Goodwill impairments have no effect on CEO cash compensation.

Research limitations/implications

This study is limited to the extent that it only considers CEO cash compensation. A future area of research is to examine the association of total CEO compensation and post‐acquisition earnings” charges. Shareholders encourage CEOs to proceed with synergistic restructuring following a merger/acquisition by increasing their compensation.

Originality/value

This study contributes to the literature by concluding that compensation committees consider the contextual nature of earnings” charges and the CEO's direct responsibility for the transaction in the determination of CEO compensation.

Details

Managerial Finance, vol. 34 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 11 April 2008

Steven T. Petra and Nina T. Dorata

This paper aims to examine whether there is an association between the level of performance‐based incentives offered to CEOs and the composition of firms' boards of

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4813

Abstract

Purpose

This paper aims to examine whether there is an association between the level of performance‐based incentives offered to CEOs and the composition of firms' boards of directors and the compensation committee.

Design/methodology/approach

Univariate tests are used to test the relation between the level of performance‐based incentives and corporate governance structures. A logistic regression analysis is used to predict the probability of CEOs receiving low performance‐based incentives when various characteristics of firms' boards of directors and compensation committees exist.

Findings

The authors find the presence of CEO duality reduces the likelihood of lower levels of performance‐based incentives offered to CEOs. Additionally, the authors find CEOs are more likely to receive lower levels of performance‐based incentives when the majority of the compensation committee members serve on less than three other boards, and when the size of the board is less than or equal to nine members.

Research limitations/implications

This study is limited by the fact that the sample may not be representative of the general population of companies in the US.

Practical implications

Shareholders who desire to keep CEO compensation levels low may consider supporting the separation of the positions of CEO and Chairperson of the Board, as well as supporting limiting the number of other boards directors may serve, and reducing or keeping the size of the board to a maximum of nine members.

Originality/value

The authors have documented an association between board structure and CEO compensation. It appears that company boards are able to monitor and control the compensation level offered to CEOs.

Details

Corporate Governance: The international journal of business in society, vol. 8 no. 2
Type: Research Article
ISSN: 1472-0701

Keywords

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Book part
Publication date: 16 October 2014

Joan DiSalvio and Nina T. Dorata

This study investigates the reaction to the Securities and Exchange Commission’s (SEC) 2010 interpretative guidance on climate risk disclosures. Issued on February 8…

Abstract

This study investigates the reaction to the Securities and Exchange Commission’s (SEC) 2010 interpretative guidance on climate risk disclosures. Issued on February 8, 2010, the release represents one of the few examples of authoritative requirements for environmental disclosure in filers’ 10-K reports. As such, we attempt to determine the effect of the new requirement on companies’ disclosures as well as how the market reacted to the guidance announcement. Based on a sample of 155 large companies drawn randomly from the Fortune 500, we find first, that, as expected, climate change disclosures increased significantly following the release, but overall, the information provision remained quite limited. We further find that, presumably as intended, companies from industries facing greater climate change exposures exhibited significantly larger increases in disclosure (controlling for prior levels of information provision). Finally, we document that the market reaction to the release of the SEC guidance was significantly positive and driven by more positive returns from firms in climate risk industries. We interpret these unexpected findings as potentially being due to investors believing the new requirements were less demanding than might have been anticipated or that they believe firms facing climate risks were in a better position to respond than other companies.

Details

Accounting for the Environment: More Talk and Little Progress
Type: Book
ISBN: 978-1-78190-303-2

Keywords

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Article
Publication date: 11 April 2008

Melissa A. Williams, Timothy B. Michael and Ramesh P. Rao

The purpose of this paper is to examine the risk‐incentive effect of CEO stock options in the banking industry.

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2854

Abstract

Purpose

The purpose of this paper is to examine the risk‐incentive effect of CEO stock options in the banking industry.

Design/methodology/approach

For a sample of industrial mergers, Williams and Rao find that the risk‐incentive effect of CEO stock options is associated with higher post‐merger risk. This result indicates that stock options may be effective in mitigating the agency problem of Jensen and Meckling wherein managers take too little risk on behalf of shareholders. The authors extend the method of Williams and Rao to the banking industry. In particular, they are interested in determining whether the same relationship holds for these highly regulated and leveraged firms.

Findings

Using a sample of 131 bank mergers that took place between 1993 and 2002, the authors determine that the risk‐incentive effect of CEO stock options is positively related to the post‐merger level of equity risk. The results of this study also show that the interaction of size and the risk‐incentive effect is negatively related to volatility following the merger, which agrees with the original study.

Originality/value

This paper extends the literature by examining an industry that is largely ignored because of its highly regulated nature.

Details

Managerial Finance, vol. 34 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 11 April 2008

Charles A. Barragato and Ariel Markelevich

The paper aims to examine earnings quality during the post‐acquisition period.

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3016

Abstract

Purpose

The paper aims to examine earnings quality during the post‐acquisition period.

Design/methodology/approach

The paper defines earnings quality as an earnings stream more closely associated with future cash flows from operations. It uses the stock market's reaction at the acquisition announcement to infer merger motives and hypothesize that synergy‐motivated acquisitions will produce higher quality earnings than agency‐motivated acquisitions.

Findings

The paper finds that synergy‐motivated acquisitions produce higher quality earnings than agency‐motivated acquisitions.

Research limitations/implications (if applicable)

The findings are consistent with this prediction and support the view that managers who pursue synergy or agency‐motivated acquisitions do not face the same economic environment and incentive schemes. The results are also consistent with the notion that incentives for earnings management are greater following agency‐motivated acquisitions when compared to those of synergy‐motivated acquisitions. The authors conjecture that these differences originate from those accounting‐based contracts that are likely impacted by reported post‐acquisition balance sheet and income statement amounts.

Practical implications

The findings of the paper show that the motive for the acquisition has lasting effect, several years post acquisition on the quality of earnings produced by the merged entity; thus furnishing additional importance to identifying the motive for the acquisition.

Originality/value

The paper uses the corporate acquisition setting to examine earnings quality during the post‐acquisition period. This paper should be relevant for researchers studying either the quality of earnings or corporate acquisitions.

Details

Managerial Finance, vol. 34 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 11 April 2008

Melissa A. Williams, Timothy B. Michael and Edward R. Waller

The purpose of this paper is to review and summarize research into managerial incentives, merger activity, performance, and the use and structure of compensation to…

Downloads
3459

Abstract

Purpose

The purpose of this paper is to review and summarize research into managerial incentives, merger activity, performance, and the use and structure of compensation to mitigate agency problems in the firm.

Design/methodology/approach

The authors discuss studies of size elasticity and compensation, pay for performance, changes in managerial compensation due to merger activities, incentives and risk taking, and the relationship between managerial risk aversion and acquisitions.

Findings

The paper identifies several prominent themes in the literature. First, size and performance both appear to be positively related to managerial compensation. There appears to be a strong relation between pay and performance, but results depend upon whether the pay measure includes all forms of compensation. With mergers, any merger gains seem to accrue to the acquired firm. It appears that acquiring managers can increase their pay by merging with other firms, and this is likely to happen in cases where shareholder returns are negative. Regarding managerial risk taking and compensation, it is likely that the sensitivity of a manager's equity‐based compensation (options, in particular) to changes in the total risk of the firm is an indicator of how willing managers will be to seek out more risk on behalf of shareholders.

Originality/value

This paper synthesizes a large body of research into an organized discussion of the issues relating to merger activity, managerial incentives, compensation, and pay for performance issues.

Details

Managerial Finance, vol. 34 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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Book part
Publication date: 16 October 2014

Abstract

Details

Accounting for the Environment: More Talk and Little Progress
Type: Book
ISBN: 978-1-78190-303-2

To view the access options for this content please click here
Book part
Publication date: 16 October 2014

Abstract

Details

Accounting for the Environment: More Talk and Little Progress
Type: Book
ISBN: 978-1-78190-303-2

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