Managerial Incentives Research Articles

The impact of institutional and managerial ownership on the pay-performance relationship: Evidence from JSE-listed firms

Abstract This study explores how institutional and managerial ownership influence the connection between executive directors’ pay and firm performance in South Africa. Employing panel linear regression models and Johnson-Neyman analysis, complex insights are revealed. This study revealed that institutional ownership acts as a double-edged sword, positively moderating the link between long-term and total incentive remuneration and Return on Assets (ROA), while negatively influencing the relationship with market-based metrics like Tobin’s Q. This suggests that institutional shareholders play a dual role in enhancing long-term alignment and tempering short-term performance pressures. Managerial ownership also demonstrates mixed impacts, positively moderating the relationship between both short-term and total incentive remuneration, and ROA, but negatively moderating the link between long-term incentive remuneration and Total Shareholder Return (TSR). These findings underscore the delicate balance between managerial incentives, shareholder interests, and long-term value creation. While higher managerial ownership aligns with short-term shareholder goals, it may also lead to managerial entrenchment and short-termism in certain contexts. This study contributes to literature on corporate governance and executive remuneration in an emerging market setting.. By revealing the nuanced effects of institutional and managerial ownership on the pay-performance relationship, the paper provides valuable insights for policymakers, investors and corporate leaders aiming to improve governance practices and foster sustainable value creation. Our study offers essential implications for corporate governance practices and sets the stage for further inquiry into the intricate relationship between ownership structure, executive compensation, and firm performance.

How Does Herbicide Resistance Change Farmer’s Weed Management Decisions? Evidence from the Roundup Ready Experiment

Adoption of diverse weed management practices is viewed as essential for slowing the spread of herbicide-resistant (HR) weeds. Yet, adoption of diverse tactics has remained low, while there has been explosive growth of resistant weeds. This study analyzes U.S.-farm-level data to identify factors affecting adoption of diverse weed management practices. This study uses directed acyclic graphs (DAGs) to consider how practice adoption is influenced by different causal pathways between farmer and farm characteristics and farmer awareness of and concern over HR weeds. This study then uses multiple regression analysis to estimate the direct and indirect pathways that influence practice adoption. Respondents relied more heavily on herbicide-based weed control methods than on mechanical or cultural methods. Concern over herbicide resistance increased the number of practices farmers adopted and the percentage of acres where farmers implemented these practices. Practice adoption was negatively associated with increasing levels of farmer risk aversion. Technological optimism—belief that new herbicides would soon be developed to counter HR weeds—discouraged diverse herbicide use practices that combat resistance, but encouraged use of some non-chemical weed control methods. Perceived weed dispersal externalities (from weed mobility) led to more diverse weed management, running counter to hypotheses that greater mobility reduces incentives for individual resistance management.

Can the MD&A Tone of Listed Firms’ Annual Reports Predict Their Future Performance? Empirical Evidence Based on Machine Learning Text Analysis*

AbstractBased on a sample of listed companies in China's A‐share market between 2009 and 2019, we analyze the tone of the Management's Discussion and Analysis (MD&A) section of 15 743 annual reports through machine learning. The MD&A tone displays a significantly positive association with the firm's future financial performance, proving that the textual tone of MD&A includes forward‐looking aspects regarding management's intentions for the company's prospects, and investors can use it to forecast the firm's future performance. Additionally, higher levels of internal control quality, stronger analyst following, and higher holdings by institutional investors can enhance the correlation between the MD&A tone and the company's future performance.

Dynamic Contract Design in the Presence of Double Moral Hazard

We consider a stylized incentive management problem over an infinite time horizon, where the principal hires an agent to provide services to customers. Customers request service in one of two ways: either via an online or a traditional offline channel. The principal does not observe the offline customers’ arrivals, nor does she observe whether the agent exerts (costly) effort that can increase the arrival rate of customers. This creates an opportunity for the agent (i) to divert cash (that is, to under-report the number of offline customers and pocket respective revenues) and also (ii) to shirk (that is, not to exert effort), thus leading to a novel and thus far unexplored double moral hazard problem. To address this problem, we formulate a constrained, continuous-time, stochastic optimal control problem and derive an optimal contract with a simple intuitive structure that includes a payment scheme and a potential termination time of the agent. We enrich the model to allow the principal to either (i) dynamically adjust the prices for the services in both channels or (ii) monitor the agent. Both tools help the principal to alleviate the double moral hazard problem. We derive respective optimal strategies for using those tools that guarantee the highest profits. We show that the worse the agent’s past performance is, the lower the prices should be set and the more the principal should monitor the agent. This paper was accepted by Ilia Tsetlin, behavioral economics and decision analysis. Funding: The work of F. Tian is financially supported by the Hong Kong RGC Funding [RGC General Research Fund 2023/24 17502023], HKU Seed Fund for Basic Research for New Staff (2022), and the HKU Business School Shenzhen Research Institute [SZRI2023-BRF-04]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.01169 .

MUDANÇAS CLIMÁTICAS: O PAPEL DA LEGISLAÇÃO BRASILEIRA NA PROTEÇÃO DAS FLORESTAS

This article explores how climate change affects the planet on a global scale, causing rising temperatures, rising sea levels, and ocean acidification, among other issues. It analyzes how the United Nations (UN) has sought to mobilize countries to address these challenges. In this context, Brazilian legislation plays a crucial role by establishing norms to protect forests, biodiversity, and the quality of life for the population, ensuring the right to an ecologically balanced environment as stipulated in the Federal Constitution of 1988. Despite the existence of laws such as the Forest Code and the National Climate Change Policy (PNMC), which aim to reduce pollutant emissions and curb practices that contribute to the greenhouse effect, implementation still lacks effectiveness and direct incentives to promote sustainable practices. Additionally, the Public Prosecutor’s Office is essential in defending the environment and preventing illegal deforestation. This research adopts a qualitative approach, based on literature reviews and case analysis. The findings indicate that Brazilian legislation, although robust, requires more effective implementation and collaboration from society to tackle the challenges posed by climate change and ensure a sustainable future.

Strategic use of provisions: Evidence from European multinationals

Provisions involve a high degree of judgment by corporate managers and substantially affect companies’ reported performance, arguably making them prone to earnings management. To analyze the strategic use of provisions under International Accounting Standard (IAS) 37, we examine the notes disclosures of large European companies that provide detailed information about yearly additions and utilized and unutilized reversals of prior provisions. First, our analysis reveals that firms suspected of earnings management tend to withhold disaggregated information on their provisions. Second, by focusing on firms that disclose detailed information, our study suggests that they strategically adjust provision expenses based on their earnings management incentives. Third, considering the use of provisions over time, we find that firms exhibit increased discretionary additions and decreased unused reversals during exceptionally profitable years, suggesting corporate managers engage in “cookie jar” accounting. In contrast, firms show lower discretionary additions and higher unused reversals in periods when they risk missing earnings benchmarks. Our findings suggest the strategic use of provisions and indicate that disaggregated notes disclosures on provisions can provide relevant insights into corporate earnings management strategies.

The Influence of Urban New Energy Development Orientation on New Energy Technology Innovation in Firms

Unlike existing energy policies that adopt a macro-level perspective, this paper examines the impact of China’s new energy demonstration cities (NEDC) policy on micro-agents. Using longitudinal data covering Chinese publicly listed firms in new energy industries, the empirical results show that the NEDC policy significantly increases firm’s new energy patents in pilot cities compared to those in non-pilot cities. We examine the potential channels via industrial upgrading effect, relative scale effect, direct incentive effect, and factor aggregation effect. In addition, we find that the NEDC policy performs better in areas with more governmental new energy attention and higher infrastructure levels, and state-owned businesses are more proactive.

Bridging sentiment and finance: An exploration of BOD statements and bank ratios in Jordan

Purpose: This study explores the intricate interplay between sentiment extracted from Board of Directors (BOD) statements and the traditional financial metrics of banks. It investigates the relationship between a bank’s financial performance, measured by various financial ratios, and the sentiment expressed in BOD statements.Design/methodology/approach: Drawing from a dataset encompassing BOD statements from 15 Jordanian banks spanning 2017 to 2021, sentiment analysis techniques are employed to derive sentiment scores. These scores are then juxtaposed with principal components distilled from financial metrics to examine their predictive relationship.Findings: Preliminary findings reveal significant non-linear patterns between Hu and Liu’s (2004) sentimental analysis (Lui_sen), the Data Science Lab’s (n.d.) multilingual sentiment tool (multi_sen), and the principal components. A subsequent random-effects panel regression further elucidates these relationships, highlighting the significant influence of specific principal components on sentiment scores. This study provides a compelling case for integrating sentiment analysis with traditional financial indicators, offering a more comprehensive toolkit for evaluating bank performance.Research limitations/implications: Future research should explore broader datasets across multiple sectors, to validate the generalisability of the findings beyond the banking sector in Jordan.Practical implications: This research holds implications for investors, analysts, and stakeholders by combining sentiment analysis with traditional financial metrics. It offers deeper insights into the health of banks and the intentions of management. This integrated approach allows stakeholders to make informed decisions and mitigate risks based on a more comprehensive view of banks' financial situations. Additionally, the possibility of real-time sentiment analysis enables the dynamic monitoring of banking institutions' financial health as updated data becomes available.Social implications: The study’s results are valuable to users of financial information, aiding the Association of Banks and the Central Bank of Jordan in formulating policies for the banking sector. Auditors, consultants, and regulatory bodies in Jordan can also benefit from these insights.Originality/value: This is the first study exploring the relationship between sentiment extracted from BOD statements and traditional financial metrics in Jordan. It provides novel evidence of this relationship, contributing to the literature on the integration of textual data analysis and financial performance.

Study on the relationship between corporate overinvestment and management incentives—An analysis from the perspective of different ownership structures

Study on the relationship between corporate overinvestment and management incentives—An analysis from the perspective of different ownership structures

Green agricultural technology extension strategies considering industrial organization impacts: Direct subsidy VS indirect incentive

Considering an agricultural production and consumption system composed of the government, enterprise, farmers and consumers, this paper constructs models for green agricultural technologies (GATs) extension based on the contract farming and cooperative, so as to investigate the interaction mechanism between promotion strategies and agricultural industrial organizations (AIOs) as well as its effect on GATs extension. The results show that direct subsidy and indirect incentive both can promote GATs, but the incentive mechanisms of the two promotion strategies are different; under the two AIOs, the optimal promotion strategy to the government is related to the coefficient of indirect incentive cost, and the direct subsidy and indirect incentive both have advantage intervals; given promotion strategies of the government, the combination of direct subsidy and the cooperative can increase the profit of green farmers, while the combination of indirect incentive and the contract farming can increase the amount of green farmers; based on interaction mechanism, the combination of indirect incentive and the contract farming as well as the combination of direct subsidy and the cooperative both can achieve Nash equilibrium from perspectives of the government and enterprise, however, the maximum promotion effect of GATs can be achieved only within its advantage interval. Thus, our research can provide theoretical guidance for governments to make better decisions on promotion strategies, and also is helpful to enterprises to choose optimal AIOs in the process of green transformation of agriculture.

Interaksi Antara Laporan Keuangan Konservatif dan Insentif Manajerial dalam Pengambilan Keputusan: Tinjauan Literatur

This study examines the interaction between conservative financial reporting and managerial incentives in decision-making, using a qualitative approach through a literature review. Conservative financial reporting plays a crucial role in enhancing the transparency and accuracy of information utilized by managers in the decision-making process. On the other hand, optimally designed managerial incentives can encourage managers to value and utilize the accounting information presented conservatively. The findings indicate that accounting conservatism can reduce the risk of inappropriate decision-making, although it may also pose potential risks of avoidance towards necessary investments for company growth. This research provides insights into the importance of balancing the implementation of conservative financial reporting and managerial incentives, as well as its implications for corporate performance. The results of this study are expected to serve as a reference for company management in designing more effective incentive systems and reporting.

Soil-Based Emissions and Context-Specific Climate Change Planning to Support the United Nations (UN) Sustainable Development Goal (SDG) on Climate Action: A Case Study of Georgia (USA)

Soil-based emissions from land conversions are often overlooked in climate planning. The objectives of this study were to use quantitative data on soil-based greenhouse gas (GHG) emissions for the state of Georgia (GA) (USA) to examine context-specific (temporal, biophysical, economic, and social) climate planning and legal options to deal with these emissions. Currently, 30% of the land in GA has experienced anthropogenic land degradation (LD) primarily due to agriculture (64%). All seven soil orders were subject to various degrees of anthropogenic LD. Increases in overall LD between 2001 and 2021 indicate a lack of land degradation neutrality (LDN) in GA. Besides agricultural LD, there was also LD caused by increased development through urbanization, with 15,197.1 km2 developed, causing midpoint losses of 1.2 × 1011 kg of total soil carbon (TSC) with a corresponding midpoint social cost from carbon dioxide (CO2) emissions (SC-CO2) of USD $20.4B (where B = billion = 109, $ = U.S. dollars (USD)). Most developments occurred in the Metro Atlanta and Coastal Economic Development Regions, which indicates reverse climate change adaptation (RCCA). Soil consumption from developments is an important issue because it limits future soil or forest carbon (C) sequestration potential in these areas. Soil-based emissions should be included in GA’s carbon footprint. Understanding the geospatial and temporal context of land conversion decisions, as well as the social and economic costs, could be used to create incentives for land management that limit soil-based GHG emissions in a local context with implications for relevant United Nations (UN) initiatives.

Managerial incentives and earnings management: Insights from union certification elections

AbstractThis study examines how unionization affects firms' financial reporting. Using a regression discontinuity design, we compare practices of firms narrowly winning and losing union certification elections. We find that winning firms depress earnings significantly more by inflating discretionary expenses, particularly research and development expenses, to strengthen their bargaining positions with workers. We further show that this manipulation aligns with managers' financial incentives, career motives, and entrenchment levels. The paper highlights managers' strategic use of real earnings management in worker negotiations and provides causal evidence on how the dynamic relationships among managers, shareholders, and workers shapes firms' financial reporting.

Corporate Social Responsibility, Earnings Management, and Cash Holding: A Study of Non-Financial Firms in Pakistan

This study investigates the interplay between CSR practices, earning management, and cash holdings in Pakistani publicly listed companies (PLCs). Spanning the period from 2013 to 2022, the research aims to provide empirical insights into how CSR initiatives influence financial practices within the Pakistani context. Methodologically, the study employs panel unit root tests and compares Ordinary Least Squares (OLS), fixed effects, and random effects models to analyze a sample of 202 non-financial firms listed on the Pakistan Stock Exchange. The implications of these findings underscore the importance of strategic CSR integration to enhance financial transparency, mitigate agency conflicts, and foster sustainable corporate growth. Managerial implications suggest that executives should focus on enhancing board effectiveness, strengthening audit oversight, aligning managerial incentives with long-term shareholder interests, and integrating CSR initiatives into core business strategies. However, the study acknowledges several limitations. These include the sector-specific focus on non-financial firms, which may limit generalizability to other sectors within the Pakistani economy. The study's reliance on panel unit root tests and econometric models, while robust, may benefit from alternative methodological approaches and sensitivity analyses. In conclusion, while this study contributes valuable insights into the CSR practices and financial management of Pakistani PLCs, future research should explore longitudinal trends, sector-specific variations, the role of emerging technologies in integration of CSR into corporate strategies. Addressing these areas would further enhance our understanding and inform policy interventions aimed at promoting transparency, accountability, and sustainable in emerging market economies like Pakistan.

A strategic evaluation of BIM-driven information management in the context of ISO 19650-2 standard

PurposeThis paper presents an in-depth evaluation of BIM-driven information management in the context of ISO 19650-2. The study aimed to understand and evaluate the existing mechanisms and the recommended activities and tasks of collaborative information management, particularly as the Turkish AEC organizations are currently implementing ISO 19650-2.Design/methodology/approachThe study employed a qualitative research design based on information management stages of ISO 19650-2. Semi-structured interviews were conducted with purposefully selected professionals. The framework analyses were made with MAXQDA through conceptual coding to identify current drivers, challenges and incentives for BIM-driven information management. The frequencies of common themes, required tasks and semantic relationships were reported systematically and interpreted to provide a conceptual implementation map, practical insights and actionable recommendations.FindingsThe study results encompass strategies for establishing new tasks and implementation procedures to uphold business value by aligning information management standards with evolving project requirements, providing detailed and responsive EIRs, early use of CDEs, compliant production methods, clarity of roles and responsibilities, increased organizational capacity and capabilities, sustained planning and production quality and leveraging lessons learned.Originality/valueThe study provides evidence-based arguments and strategic insights for BIM-driven information management, focusing on the current implementation compatibilities with ISO 19650-2. Findings and discussions highlight the necessity of industry-wide transformations, reengineered activities/tasks and compliant information flows, which are crucial for adopting ISO 19650-2 and the formulation of national annex documents.

Private provider practices and incentives for hypertension management in rural and peri-urban Telangana, India– a qualitative study

Hypertension poses a critical threat to health in India, being the predominant risk factor for mortality and disability. With over 70% of outpatient care being provided by the private sector, our study investigated the practices and incentives of private health providers in screening, diagnosing, treating, monitoring, and counseling hypertension patients in rural and peri-urban India. Conducted from April 2020 to February 2021, the qualitative study involved 46 participants, including various healthcare professionals and patients in three Telangana state districts. Analysis revealed a lack of recognition of hypertension’s gravity among private providers in these areas, leading to inconsistent screening practices and varied diagnostic thresholds, particularly among rural medical practitioners. Both formal and informal providers lacked standardized protocols and follow-up mechanisms, with limited technical knowledge about hypertension observed, especially among rural practitioners who were often the first point of contact. Drug effectiveness, and incentives from pharmaceutical sales representatives influenced prescribing practices. Diagnostic labs also offered financial incentives for patient referrals. Thus, aligning providers’ objectives with patient preferences and public health goals is crucial. To encourage evidence-based hypertension care, the government and NGOs could implement strategies such as tailored incentives, financial rewards, tax benefits, accreditation, and recognition for private healthcare providers. Professional bodies in the private sector should establish programs emphasizing quality assurance and certifications. Future research should focus on designing and testing new models for private sector hypertension service delivery, coupled with targeted interventions to enhance care in rural and peri-urban settings.

Re-arquitecturar los territorios, un desafío ineluctable para la sostenibilidad compartida

The dynamic - historical reading of the planning, andthe balances of what we consider as a structural “bad urbanrural development” of the territories (at least since the 60s), is essential. This position, although open to debate, has become evident taking into account the also dynamic reading of the great challenges of sustainable transitions and "resilience”, that have marked planning and management intentions in Central American planning history. This statement necessarily leads torethinking global architectures inherited (built form, forms of management and planning, governance) to define the intensities of the changes. Moving towards this, implies to define the method and the transition system to be implemented, and to define the instruments that allow rehabilitating, reconstructing,remodeling, “re-architecturing” territories and institutions inherited. However, the re-architecture proposed will depend on the collective clarity, first of the pasts carried over, and second the desired futures. Accounting for the "arts" or the "politicalsocialinstitutional techniques" that created (and continue to do) the "metropolitan areas", is today an essential stage to be able to move towards new development models. Indeed, many local and metropolitan challenges, such as the “right to sustainable housing for all” (which has a high component of physicalconstructive design), contain high probabilities of never being effective in the current and trending context. Given that the current political, institutional, economic and social capacities, to make considerable changes in the management of the territories, seem to be compromised. Forging new capabilities and new abilities (financial, environmental, social, and including technical-constructive) is a collective challenge. And collectively conceiving a new urban planning and territorial planning (corrective – preventive and collaborative) is an urgency. ILIA: Investigaciones Latinoamericanas en Ingeniería y Arquitectura, No. 01, 2024: 167-173.

Lesson from stock price crash: Changes in managerial confidence and incentives

This paper investigates the consequences of stock price crashes. I find that stock price crash risk subsequently reduces managerial confidence levels, as proxied by the CEO's option-based and earnings call transcript's text-based measures. I also find that stock price crash risk reduces CEO compensation and equity incentives, suggesting that a firm seeks to adjust managerial incentives after its stock price crashes to prevent future occurrences. Furthermore, CEOs with high confidence are more likely to curtail overinvestment after their crash experiences relative to others, thereby contributing to shareholder value. Overall, this paper provides novel evidence that CEOs and firms appear to learn from their experiences of stock price crashes, suggesting that stock price crashes may induce experience-driven conservatism that influences CEO and corporate decisions.

The Impact of Job and Organizational Factors on Turnover Intentions of Case Managers in Medicaid

The Impact of Job and Organizational Factors on Turnover Intentions of Case Managers in Medicaid

Farmer identities and permanent grassland management: Evidence from five European biogeographic zones

Abstract Permanent grassland (PG) provides multiple ecosystem services. However, there is increasing concern regarding the decreased multifunctionality of PGs, including those located in Europe. The decreased PG multifunctionality has been attributed to the increased intensity of PG management, where decision‐making is influenced by farmers' relevant behavioural intentions and self‐identities. In order to investigate how farmer identities can translate into future adoption of PG management practices, interviews (n = 373) were conducted with farmers from five European biogeographic zones. Their farms are located in Continental/Pannonian (Czech Republic), Mediterranean (Spain), Boreal (Sweden), Alpine (Switzerland) and Atlantic (United Kingdom) biogeographic regions. The data were analysed using a mixed‐method approach involving thematic analysis and multinomial logistic regression. The thematic analysis enabled seven farmer ‘identity’ types to be identified. The results of multinomial logistic regression showed that productivist identity was a predictor of farmers' intention to intensify or extensify PG in future, while land caretaker identity predicted maintenance of current PG management practice. Farmers with a higher dependence on income from agri‐environment schemes were more likely to extensify their PG in future, while those with a higher dependence on income from farm production were more likely to maintain current PG management practices. Older farmers were less likely to extensify their PG, and those having organic and extensive farms were more likely to intensify PG in future. Future policies and interventions that aim to increase PG‐related ecosystem‐service multifunctionality can be more targeted by considering specific farm attributes, farmer identities and their future PG management intentions, as well as regional differences in these. Financial benefits and risks perceived by farmers should be considered when promoting any management practices, including policy interventions and policy levers. Read the free Plain Language Summary for this article on the Journal blog.