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The purpose of this study is to examine whether executive compensation structure is a predictor of a value judgment shift facilitating fraud. The Raval (2018) disposition-based fraud model theorizes that in a fraud, a judgment shift occurs that results in an intentional action. Judgment shifts are influenced by intertemporal rewards, an executive compensation structure comprising salary (immediate reward) and delayed compensation in performance-based incentives.

Using an archival data set consisting of frauds identified through Securities and Exchange Commission Accounting and Auditing Enforcement Releases, the compensation structure of executives involved in frauds is compared against the compensation structure of executives in a peer control group.

There was a significant difference in the intertemporal rewards of the compensation structures between the two groups, indicating that compensation structure presents intertemporal choices leading to a judgment shift that influences the deliberate action of fraud.

This study represents the first empirical test of the disposition-based fraud model using intertemporal rewards leading to judgment shift.

Executive compensation structure should reduce intertemporal rewards for executives reducing judgment shifts that can result in risk of fraud.

This study addresses how executive compensation structure can result in fraud.

The purpose of this paper is to investigate how the structure of both CEO and non-CEO executive compensation affects the overall risk of a firm. The author focuses on the interplay between CEO and non-CEO executive compensation structure.

The author uses a hand-collected pension-database that employs both OLS and two-stage least squares regressions to determine the effects of inside debt on default risk using the distance-to-default framework. The database consists of 8,965 executive-year data points from 272 firms.

This paper accomplishes three major objectives: first, the author presents a significant extension of Sundaram and Yermack (2007) by including non-CEO executives; the author demonstrates how the differences in inside debt between CEO and non-CEO executives are directly related to firm risk; and that funding these pensions via a Rabbi Trust eliminates most of the risk-shifting effects. Firms with the lowest compensation leverage gap between CEO and non-CEO executives were most likely to observe the agency costs associated with high executive leverage. When compensation leverage structures were substantially different, or the pension was pre-funded, these effects are neutralized.

To the best of the author’s knowledge, the first paper addresses the effects of Rabbi Trusts on risk-shifting behavior between both CEOs and non-CEO executives. Further, the author extends Sundaram and Yermack (2007) using a hand-collected database six times larger than the original paper. By focusing on the “leverage gap” between CEOs and non-CEO executives, the author presents unique evidence that underlines the risk dynamics between CEOs and their boards.

This paper aims to study the impact of external fairness of executive compensation on M&A premium, and examine the moderate role of institutional investors. The high M&A premium is the main factors that induce the huge impairment of listed companies’ goodwill and the plummeting performance. Executives are the decision-makers of M&As, and their decision-making process is inevitably affected by the psychological factors. In recent years, institutional investors have become an important external force that can affect the governance of listed companies.

The authors use M&A data of listed companies from 2008 to 2018 and use OLS regression to test the relationship between executive compensation fairness and M&A premium.

The results show that the lower the external fairness of executive compensation, the greater the M&A premium. Institutional investors can effectively reduce the impact of external compensation unfairness on M&A premiums. The mechanism tests show that executives' psychological perception of fairness induced by external unfairness reduces their motivation to work and prompts them to use high premium to seek alternative compensation incentives. Further examinations of executive characteristics and corporate characteristics show that the role of external unfairness in executive compensation in driving M&A premiums is more pronounced in companies with longer executive tenure, weaker executive reputation incentives and private property.

This paper enriches the research on the pre-factors of M&A premiums from the perspective of executives’ psychological perception of fairness, provides evidence that institutional investors play a positive governance role and provides decision-making references for companies to take corresponding measures to reduce M&A premium risks.

This study examines how cash and stock bonus compensations influence top executives to allocate a firm's resources to fixed intangible assets investment and the extent to which this relationship is conditional on executives' ownership, firm growth, internal cash flow and leverage.

Using data from 213 non-financial and non-utility UK FTSE 350 firms for the period 2007–2015, generating a total of 1,748 firm-year observations, panel econometric methods are employed to test the authors’ model.

The authors observe that executives' cash bonus compensation positively impacts fixed intangible assets investment. However, executives' stock bonus compensation has a negative and significant influence on fixed intangible assets. The authors further observe that executives either cash bonus or stock bonus crucially invest more in fixed intangible assets when the firm has a growth potential. Also, both cash bonus and stock bonus executives in firms with lower internal cash flow spend less on fixed intangible assets. Similar results are also observed for those stock bonus-motivated executives with an increase in fixed intangible assets for low leverage firms but a decrease for high leverage ones.

A key limitation of this study is its concentration on a single country (United Kingdom). Thus, future studies can expand the focus of this study by looking at it from the perspective of multiple countries.

The practical relevance of the study results is that firms with high growth opportunity in fixed intangible assets activity can use more cash bonus compensation (risk-avoiding incentive) to induce corporate executives to invest more in such activity. This finding is particularly important given the increasing appetite of firms in this knowledge-based economy to create expansion through fixed intangible assets investment. That is, for firms to increase fixed intangible assets investment, this study suggests that executive cash bonus compensation cannot be ignored.

While this paper builds on the classic Q theory of investment literature, it is the first – to the best of the authors’ knowledge – to explore how cash and stock bonus compensations influence top executives to allocate a firm's resources to fixed intangible assets investment and the extent to which this relationship is conditional on executives' ownership, firm growth, internal cash flow and leverage.

The relationship between the clarity of proxy statement presentation of executive compensation, the level of compensation and firm performance was examined Consistent with the argument that firms attempt to avoid potential threats to legitimacy, clarity of presentation and the level of executive compensation were negatively related. There was no relation between firm performance and presentation clarity. Management stock ownership was not related to clarity of presentation.

The purpose of this paper is to explore whether socially responsible firms recognize the potential conflicts that come with higher levels of executive compensation, and thus limit executive pay relative to what is being paid in other firms. In the process, the relationships between executive compensation and financial performance, and corporate social performance and financial performance are examined to determine whether potential compensation and social performance links are coming at the expense of company financial performance.

The empirical data for this research were obtained from a stratified sample of Fortune 1000 companies pulled from across more than 15 industries. Multiple regression analysis is utilized to test three hypotheses.

In line with the hypotheses, results indicate that companies identified as good corporate social performers do in fact have lower levels of executive compensation and there is some support found for a positive relationship between social and financial performance.

The results provide support for the view that firms concerned about social responsibility can put restrictions on executive compensation and still achieve good financial performance, and make a case that executive compensation should in fact be a concern of all socially responsible firms.

There are few studies that examine the direct link between executive compensation and corporate social responsibility. This study addresses this gap in the literature and adds to the discussion as to whether socially responsible firms might seek to better balance compensation across the firm and emphasize that profit, both individual and corporate, must be earned within a system that is fair and balanced for all.

The purpose of this paper is to understand the effects of influence and reciprocity as the elements in the determination of executive compensation.

A purposive sample was drawn, which comprised of 13 respondents chosen for their expertise relating to the determination of executive compensation in state-owned enterprises (SOEs). A semi-structured interview guide was used as the data-gathering instrument. A thematic analysis technique was used for data analysis.

The findings in this study identified three themes resorting under influence as crucial in the process of determining executive compensation, namely an executive’s social capital, intellectual capital and social comparison. Two major themes emerged under reciprocity, namely the pay-performance relationship and role complexity. Finally, the political-symbolic role emerged as the main theme that described the relationship between influence and reciprocity.

The findings provide a more detailed description of the process involved in determining executive compensation in SOEs.

There has been limited if any, empirical study on the process involved in setting executive compensation. The limited focus has always been on accounting measures. Incorporating the socio-psychological view attempts to provide a more comprehensive and conclusive explanation of the process of determining executive pay in theory and practice.

The purpose of this paper is to identify the reasons for the differences of executives' compensation across industries from the managerial discretion perspective.

Based on the data from 37 manufacturing industries from 2002 to 2007 in China, managerial discretion for each industry is calculated regarding to the conception raised by Hambrick and Finkelstein which is further clustered into three groups. Then, regression model is used to testify the relation between managerial discretion and executives' compensation.

The executives' compensation is positively related to managerial discretion that is determined by the industrial environment. In the faster growing or higher competing industries, the executives tend to have more managerial discretion, thus they will be better paid due to the extensive latitude of their decision making.

To a certain extent, managerial discretion can be taken to measure the uncertainty or marginal productivity of the executives' work. From the industrial perspective, there are actually some factors far beyond the control of executives but influencing their pay.

When designing the compensation system for the executives, the industrial factors surely should be taken into consideration, to work out a fair and competitive incentive plan.

The paper proves a very important point in the issue of the decisive factors for executives' compensation. Managerial discretion raises the uncertainty and complexity to executives' work, thus it determines the compensation.

This paper aims to contribute to the discussion on the executives’ team and firm performance by investigating the relationships between executives’ compensation, management gender diversity and firm financial performance in growth enterprises market (GEM) listed firms in China.

Data are collected from 461 companies listed on GEM boards during the period from the year 2016 to 2018. Specifically, executives’ compensation and female executives are set as the independent variables, and the proxy selected of corporate performance is Tobin’s Q ratio.

The results show that the correlation between corporate performance and executive cash payment is not significant, while executives’ equity-based compensation shows a significant positive correlation with firm performance. In addition, the participation of female executives is negatively associated with firm performance.

The results have practical implications for governments, policymakers and regulatory authorities, by indicating the importance of women to corporate success. In particular, the findings of this paper emphasize the specific background of GEM in China and provide empirical support for the value of women’s participation in corporate governance. In addition, the finding on the relationship between executive compensation and corporate performance of GEM listed companies provides guidance for the establishment of a performance compensation system of GEM listed companies in China.

This paper provides new evidence for the current literature of executive team and corporate performance. This is the first paper to adopt triangulation in theories from different disciplines including optimal contractual approach, managerial power approach as new perspectives of agency theory, upper echelons theory, motivational-hygiene theory and women leadership style theory. The results will contribute to provide guidance for enterprises to formulate an efficient compensation system and build a reasonable senior management team structure.

This paper aims to examine the impact of executive compensation on firm risk-taking behavior, measured by the volatility of stock price returns. Specifically, this analysis explores three hypotheses. First, the impact of short-term and long-term executive compensation packages on firm risk is analyzed to assess whether the packages incentivize risk-taking behavior. Second, the authors test how these compensation and risk relationships were impacted by the financial crisis. Third, they expand the analysis to see if the relationship varies across different industries.

The econometric approach used to examine the executive compensation and firm risk relationship takes the form of two different panel model specifications. The first model is a pooled model using the panel data of executive compensation, the firm-level control variables and volatility of stock market returns. The second model highlights the differences in the relationship between executive compensation and riskiness of firm behavior across industries.

The authors find a significant and robust relationship, showing that during the post-financial crisis period firms tended to use long-term compensation shares to reduce firm risk. They also find that the relationship between various compensation components and firm risk varies across industries. Specifically, the bonus share of compensation negatively impacted firm risk in the financial services industry, while it positively impacted risk in the transportation, communication, gas, electric and services sectors. Additionally, long-term compensation share exhibits an inverse relationship with firm risk in the financial services, manufacturing and trade industries.

The conclusions of this paper suggest that there is indeed a relationship between executive compensation and firm risk across industries. There was a notable change in the relationship however between firm risk and long-term compensation following the financial crisis, where firms used long-term compensation to reduce firm riskiness. In other words, the financial crisis changed the nature of this relationship across S&P 1500 firms. The last key finding is that there exist differences in risk and compensation relationships across industries, and these differences across industries are highlighted across both bonus share and long-term incentive share variables. This is the first study to explore this relationship across industries.