Executive Compensation Performance Research Articles

How Does CEO Duality Influence ESG Scores in Hospitality and Tourism Companies? Confounding Roles of Governance Mechanisms and Financial Indicators

Previous studies have yielded inconsistent results about the impact of CEO duality on corporate performance in the hospitality and tourism (H&T) industry. To further delve into this relationship, we investigated the causal relationship between CEO duality and environmental, social, and governance (ESG) performance under various board characteristics and financial indicators. The data from the Thomson Reuters Eikon database were evaluated using a machine learning technique that included targeted maximum likelihood estimation (TMLE), augmented inverse probability weighting (AIPW), and neural network analysis, all of which are doubly robust estimators with cross-fitting. The findings suggest that CEO duality negatively impacts environmental pillar scores but not other outcomes (i.e., governance and social pillar scores). Among the governance practices and financial indicators, policy executive compensation performance, policy executive compensation ESG performance, and return on invested capital (ROIC) have positive relations with total ESG scores. The results have important ramifications for helping H&T companies develop effective boards of directors and governance systems, as well as achieve targeted ESG performance objectives.

The Impact of Executive Compensation Performance Sensitivity on Corporate Innovation in an Uncertain Environment

The Impact of Executive Compensation Performance Sensitivity on Corporate Innovation in an Uncertain Environment

Accounting Comparability, Conservatism, Executive Compensation-Performance, and Information Quality

This paper investigates the relationship between accounting comparability, executive compensation, conditional and unconditional conservatism, and accounting information quality. The findings suggest that conditional conservatism and accounting comparability have a positive and significant impact on executive compensation. Moreover, accrual earnings management can strengthen the relationship between accounting comparability and executive compensation, whereas this is not the case with actual earnings management. Unconditional conservatism, however, does not significantly influence executive compensation. In the end, determining the correlation between earnings management and conservatism reveals that executives use conditional conservatism to perform opportunistic behaviours and gain more compensation. In light of the current results, it is expected that the assimilation of standardisation processes and their use in conjunction with existing features will enhance information quality, greater reliability of financial reports, and protect public interests.

A Comprehensive Study on the Effect of XBRL-Adopted Financial Reporting on the Sensitivity of Executive Compensation Performance: A Multi-Dimensional Perspective

XBRL is an extensible business reporting language. XBRL-adopted financial reporting has been increasingly becoming prevalent in the field of financial accounting information. The related research of XBRL adoption is a hot topic, mainly focusing on technical specifications, classification standards, and application effects of XBRL adoption. However, currently few studies have paid attention to the effect of XBRL-adopted financial reporting on corporate governance, particularly on executive compensation management. Moreover, most of the conclusions from these studies are inconsistent. This paper aims to comprehensively explore the effect of XBRL-adopted financial reporting on the sensitivity of executive compensation performance creatively from a multi-dimensional perspective. This perspective includes three dimensions of the XBRL-adopted time period, firm property, and performance, plus the 3-D crossover. The findings show that a law exists for describing the evolution of the effect of XBRL adoption over time, which indicates that the effect of XBRL adoption during an early period is greater than that during a later period. In the firm property dimension, the sensitivity of executive compensation performance of state-owned enterprises (SOEs) is higher than that of non-SOEs after XBRL adoption, and the sensitivity changing rate of SOEs is also greater than that of non-SOEs. In the firm performance dimension, the sensitivity of the executive compensation performance of well-governed firms is higher than that of poorly governed firms after XBRL adoption, but the sensitivity changing rate of well-governed firms is smaller than that of poorly governed firms. Furthermore, in the cross-dimension of time period and firm property, the effect of XBRL adoption on the sensitivity of executive compensation performance in non-SOEs shows a similar law to that in the time-period dimension. However, no obvious law is shown in SOEs. In the cross-dimension of time period and firm performance, the effect of XBRL adoption on the sensitivity of executive compensation performance in well-governed firms also shows a similar law to that in the time-period dimension. However, no obvious law is shown in poorly governed firms. In the cross-dimension of firm property and firm performance, the sensitivity of executive compensation performance is closely correlated to firm performance, and correspondingly, poorly governed non-SOEs show a low sensitivity, which is even significantly lower than those in both the overall poorly governed firms and the overall non-SOEs. The findings can help firms to identify their special properties, performances, and XBRL-adopted time periods to make appropriate decisions to improve the performance of executive compensation management after XBRL adoption.

Direct Evidence on Earnings Used in Executive Compensation Performance Measurement

What informational properties of earnings are demanded by compensation contracting for performance measurement? The answer to this question has important implications for accounting standard setting. While some expect conditional conservatism to be a desirable feature that helps to alleviate agency conflicts between shareholders and managers, others suggest that firms trade off conservatism for other important properties such as persistence. We provide a direct answer to this question using a novel dataset of the realizations of earnings that are used in bonus formulas to calculate payout to executives (hereinafter, Compensation Earnings), the disclosure of which is mandated by the SEC after 2006. Compensation Earnings can either be GAAP Earnings or deviate from GAAP Earnings at the board’s discretion; considering both cases, we examine the average properties of Compensation Earnings to infer the board’s preferences in performance measurement. On average, Compensation Earnings deviate from GAAP Earnings in a distinctly anti-conservative fashion, such that Compensation Earnings are completely removed of conditional conservatism. We find similar results in subsamples with strong corporate governance, suggesting that the removal of conservatism is unlikely driven by poor governance. There is also similar evidence in subsamples with high ex ante agency costs, where one could argue that the demand for conservatism is especially high. In none of the subsamples do we find Compensation Earnings to be conservative. Last, analyses indicate that Compensation Earnings are more persistent than GAAP Earnings. Overall, our results suggest that the board trades off conservatism for persistence in measuring accounting performance for executive compensation.

Mandatory IFRS adoption and executive compensation: Evidence from China

This study investigates how the mandatory adoption of International Financial Reporting Standards (IFRS) affects the contractual benefits of using accounting information to determine executive compensation in China. After controlling for firm and corporate governance characteristics, we find strong evidence supporting the positive role of mandatory IFRS adoption on the accounting-based performance sensitivity of executive compensation. Subsample analysis suggests that improvements in accounting-based performance sensitivity after IFRS adoption differ across regions with various levels of institutional quality and across firms that are affected to a different extent by the adoption. Additional analysis supports the argument that the positive effects of IFRS adoption on the use of accounting performance in executive compensation are driven by the reduction in accounting conservatism associated with IFRS adoption.

Institutional Trading, Information and Executive Compensation

This paper develops new theory and evidence regarding the role of institutional trading in influencing executive pay-for-performance (PPS) sensitivity. Given managerial ability to skim proceeds, and skimming to be less costly for shareholders given profit sharing between shareholders and managers, our model shows that more informative stock prices leads to less PPS contracting. Utilizing a sample of 72,000 executive-years, we find that institutional trading is negatively related to board decisions on PPS, and that the pattern of the effect is consistent with informed trading. Our results are robust to alternate specifications of our institutional trading and PPS measures. Institutional trading is negatively related to total compensation, indicating that institutional trading is not a proxy for lack of monitoring. Overall, our model and evidence imply that institutional trading acts as a substitute for pay for performance in executive compensation via an interaction with the information content of stock prices.

Study finds companies stressing pay for performance in executive compensation

AbstractThis article reports on KPMG research contrasting pay levels in high‐ versus low‐performing companies, in the context of a regulatory update on FASB's stock compensation project and corporate policy with respect to the 1 million cap on compensation deductions.