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Article
Publication date: 15 May 2017

William Kline, Masaaki Kotabe, Robert D. Hamilton and Steven Balsam

The purpose of this paper is to examine how executive pay schemes influence managerial efficiency, which the authors measure as the risk-adjusted firm performance.

Abstract

Purpose

The purpose of this paper is to examine how executive pay schemes influence managerial efficiency, which the authors measure as the risk-adjusted firm performance.

Design/methodology/approach

The authors utilized hierarchical regression to test the hypotheses.

Findings

The authors find that as options constitute a higher percentage of total compensation packages, subsequent firm risk-adjusted performance declines. The authors also find an inverse relationship between TMT stock ownership and risk-adjusted performance.

Research limitations/implications

The findings suggest that the firm stakeholders should reconsider the likely influence of option-based incentives and equity holdings on the risk-adjusted performance.

Originality/value

Most executive compensation research focuses on either the pay-to-performance or pay-to-risk links. However, in this paper, the authors combine both the performance and risk dimensions simultaneously.

Details

Journal of Strategy and Management, vol. 10 no. 2
Type: Research Article
ISSN: 1755-425X

Keywords

Book part
Publication date: 16 June 2008

Steven Balsam and David Ryan

Internal Revenue Code section 162(m) limits tax deductibility of executive compensation to $1 million per covered executive, with an exception for performance-based…

Abstract

Internal Revenue Code section 162(m) limits tax deductibility of executive compensation to $1 million per covered executive, with an exception for performance-based compensation. Both stock options and annual bonuses can qualify as performance-based, but they vary in the difficulty of qualification and the degree of additional compensation risk that qualification imposes on the executive. Most stock-option grants easily qualify with little change in risk, but qualification increases the risk associated with annual bonus compensation relative to what it was prior. The results of this study show that the propensity to issue stock options has increased for affected executives as a percentage of total compensation. Additional analysis suggests that this increase in stock-option compensation is substituting for lower increases in salary for affected executives, but not for annual cash bonuses. In fact, the results suggest that bonus compensation is also increasing as a percentage of total compensation. In summary, the results indicate that firms and their executives are acting in a way consistent with the incentives provided by section 162(m).

Details

Advances in Taxation
Type: Book
ISBN: 978-1-84663-912-8

Article
Publication date: 30 September 2014

Steven Balsam, Il-woon Kim, David Ryan and Hakjoon Song

The purpose of this paper is to examine the motivations for and variations in terms of stock option modifications under Statement of Financial Accounting Standards (SFAS…

Abstract

Purpose

The purpose of this paper is to examine the motivations for and variations in terms of stock option modifications under Statement of Financial Accounting Standards (SFAS) 123(R). Stock options are used to motivate and retain employees. Unfortunately, when stock prices decline, existing options lose their incentive value. In response, firms look for ways to re-incentivize their employees. Their choices include issuing additional options and/or modifying existing grants.

Design/methodology/approach

We investigate the economic determinants of stock option modification post SFAS 123(R), such as financial reporting cost, shareholder/political cost and employee incentive and retention. Our analysis is based on 67 sample firms that modify their stock option plans from 2005 to 2008 and 67 control firms constructed based on size, industry, year and stock price performance for the prior five years.

Findings

The results show that loss firms are more likely to modify their options, which supports the argument that financial reporting costs influence the decision to modify. We find support for the shareholder/political costs hypothesis, as the overhang ratio is positively associated with the decision to modify. However, we find no evidence that modifications substitute for additional option grants. We find that politically sensitive larger firms are more likely to incorporate more shareholder friendly measures such as excluding executives from modification or providing shareholders the opportunity to vote on modification.

Originality/value

This is the first paper examining the economic determinants of stock option modification under SFAS 123(R). Our findings provide some insights regarding economic determinants of SFAS 123(R) for accounting policy-makers and investors.

Details

Journal of Financial Reporting and Accounting, vol. 12 no. 2
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 10 August 2010

Sharad Asthana and Steven Balsam

The purpose of this paper is to show that director turnover varies in predictable and intuitive ways with director incentives.

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Abstract

Purpose

The purpose of this paper is to show that director turnover varies in predictable and intuitive ways with director incentives.

Design/methodology/approach

The paper uses a sample of 51,388 observations pertaining to 13,084 directors who served 1,065 firms during the period 1997‐2004. The data are obtained from RiskMetrics, Compustat, Execu‐Comp, CRSP, IBES, and the Corporate Library databases. Portfolio analysis, logit, and GLIMMIX regression analysis are used for the tests.

Findings

The paper provides evidence that directors are more likely to leave when firm performance deteriorates and the firm becomes riskier. While turnover increasing as firm performance deteriorates is consistent with involuntary turnover, directors are also more likely to leave in advance of deteriorating performance. The latter is consistent with directors having inside information and acting on that information to protect their wealth and reputation. When inside and outside director turnover is contrasted, the association between turnover and performance is stronger for inside directors.

Research limitations

Since data are obtained from multiple databases, the sample may be biased in favor of larger firms. The results may, therefore, not be applicable to smaller firms. To the extent that the story is unable to differentiate between voluntary and involuntary director turnover, the results should be interpreted with caution.

Originality/value

Even though extant research has looked extensively at the determinants of CEO turnover, little has been written on director turnover. Director turnover is an important topic to study, since directors, especially outside directors, possess a significant oversight role in the corporation.

Details

Review of Accounting and Finance, vol. 9 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 19 July 2009

Sharad Asthana, Steven Balsam and Sungsoo Kim

The purpose of this paper is to examine the effect of the Enron scandal, Arthur Andersen's demise and the Sarbanes‐Oxley Act on audit fees.

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Abstract

Purpose

The purpose of this paper is to examine the effect of the Enron scandal, Arthur Andersen's demise and the Sarbanes‐Oxley Act on audit fees.

Design/methodology/approach

The paper uses empirical methodology (univariate and multivariate).

Findings

Audit fees and the Big‐4 premium increased in 2002. Increase was larger for bigger and riskier clients. Evidence is also consistent with a competitive market for former Andersen clients.

Research limitations/implications

Data requirements might bias the sample towards larger sized firms. Data availability limits the number of observations.

Practical implications

The research findings on audit fees in post‐Enron and Arthur Andersen period reported in this paper are important for policy makers.

Originality/value

It is found that the premium charged by Big 4 over non‐Big 4 has increased in 2002, and that the ability of an auditor to charge a premium is adversely affected when its reputation is tarnished. It is also reported that the frequency of voluntary switches within the Big 4 is lowest in 19 years. The audit fee model was also refined by adding two ownership variables to control for agency aspect of client firms; inside and institutional ownership.

Details

Accounting Research Journal, vol. 22 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 27 February 2007

Steven Balsam, Richard Gifford and Sungsoo Kim

The objective of this research is to examine the effect of a broad‐based option program on voluntary employee turnover.

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Abstract

Purpose

The objective of this research is to examine the effect of a broad‐based option program on voluntary employee turnover.

Design/methodology/approach

The paper examines the effect of a broad‐based stock option program in a Fortune 100 company during the 1990s and uses logistical analysis.

Findings

Employee turnover is an issue due to the costs involved in recruiting and training replacements. Voluntary turnover can be reduced if a cost can be imposed on the departing employee. This cost need not be an explicit cost, but can take the form of a benefit forgone when the employee departs. Along these lines, stock option grants to employees, if properly structured, have the ability to reduce voluntary employee turnover. The paper finds that voluntary turnover is lower during the periods in which the option cannot be exercised, i.e. the vesting period. This effect is strongest for employees approaching retirement, but also holds for employees leaving the company for other reasons.

Originality/value

The finding that unvested options reduce or delay voluntary turnover, which while intuitive, has not to the author's knowledge been shown previously, and is important for those involved in the compensation plan design process.

Details

Review of Accounting and Finance, vol. 6 no. 1
Type: Research Article
ISSN: 1475-7702

Keywords

Content available
Book part
Publication date: 16 June 2008

Abstract

Details

Advances in Taxation
Type: Book
ISBN: 978-1-84663-912-8

Book part
Publication date: 24 August 2011

Robert W. Rutledge, Khondkar E. Karim and Alan Reinstein

This study examines possible influences on the level of collaboration in published research by the most productive authors of accounting literature. Understanding the…

Abstract

This study examines possible influences on the level of collaboration in published research by the most productive authors of accounting literature. Understanding the collaboration tendencies of these authors should benefit early-career-stage accounting faculty. Seven factors are examined for the publications of 93 of the most productive accounting authors. These productive authors are found to include fewer coauthors on their publications early in their careers. The number of coauthors increases through their first 16 to 17 years and then decreases through the remainder of their careers. The results also indicate that productive accounting researchers include a greater number of coauthors on more recently published articles and on longer articles. Fewer coauthors are included when a productive author is affiliated with a “top-10” university or on articles published in highly ranked accounting journals. Lastly, the results show that prolific authors seek out coauthorship throughout their careers and usually include one or more coauthors on their publications. Implications from these results and specific suggestions for accounting faculty are discussed.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-78052-086-5

Article
Publication date: 3 June 2019

Steven Lilien, Bharat Sarath and Yan Yan

The purpose of this paper is to investigate the association between bargain purchase gains (BPGs) booked by the acquirer and smoothing of acquirers’ earning performance…

Abstract

Purpose

The purpose of this paper is to investigate the association between bargain purchase gains (BPGs) booked by the acquirer and smoothing of acquirers’ earning performance across time.

Design/methodology/approach

The authors use a sample of 122 bargain purchase acquisitions in non-financial industries from 2009 to 2012 and a pair-match control group of 122 goodwill acquisitions.

Findings

The authors find that BPGs, and in particular, the Level-3 fair value estimates of intangible assets acquired, have consistently been used to smooth earnings but that such smoothing activities are not associated with long-term market returns.

Originality/value

This study is the first one to investigate bargain purchase acquisitions in a broad range of non-financial industries and suggests that managers are using the valuation of intangibles to avoid unfavorable earnings even though these valuations are not credible to investors.

Details

Asian Review of Accounting, vol. 28 no. 2
Type: Research Article
ISSN: 1321-7348

Keywords

Book part
Publication date: 13 March 2019

Steven Gerrard

In 1960, Alfred Hitchcock’s Psycho stunned both the cinema-going public and critics alike. Its tale of a young, genial, likeable and mother-fixated hotel proprietor …

Abstract

In 1960, Alfred Hitchcock’s Psycho stunned both the cinema-going public and critics alike. Its tale of a young, genial, likeable and mother-fixated hotel proprietor – Norman Bates (played by Anthony Perkins) – whose psychotic tendencies and fractured personality tapped into the zeitgeist of an America changing in a post-World War II world, was very much the antithesis of rock ‘n’ roll rebels like Elvis Presley and James Dean. Norman Bates was Anthony Perkins and Anthony Perkins was Norman Bates.

In 2013, Norman resurfaced from numerous remakes in Bates Motel. With its nod to the past, and a look to the future of how Norman’s story pans out, the series’ narratives, characters and situations showed there was life for him, his mother and the motel beyond cinema.

This chapter examines how Creed’s ideas of ‘Monstrous’ can be overlaid onto Norman, his mother Norman and Bates Motel.

Details

Gender and Contemporary Horror in Television
Type: Book
ISBN: 978-1-78769-103-2

Keywords

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