PurposeWe investigate the relationship between chief executive officer (CEO) compensation and a firm's financial performance in the insurance industry to determine CEO pay policies that are more effective in promoting specific financial corporate goals.Design/methodology/approachConsidering different components of executive pay, we investigate the latter’s relationship with the corporate performance of the insurance industry using the generalized method of moments (GMM) model developed for dynamic panel estimation. Our data encompasses the periods before and after the 2008 financial crisis.FindingsWe observe that after the crisis the insurance industry experienced a major change in executives’ compensation packages. While CEOs’ compensation was primarily based on bonuses pre-crisis, the average size of the bonus was reduced to one-third of the level, stock awards and nonequity incentives were doubled and option awards increased almost 70 percent in the post-crisis period. It is also evident that the work experience of CEOs and the firm's financial performance play a significant role in determining CEO compensation. As the CEO becomes more experienced, stock awards and option awards replace cash bonus.Originality/valueThe paper finds supporting evidence for the agency-related problem in the insurance industry and the convergence of interest hypothesis, suggesting that a firm's market valuation rises as its managers own an increasingly large portion of the firm. To align the interest of owners with that of management, managers should be converted into owners via stock ownership. The paper addresses a topical issue regarding pay and performance and the effect of the financial crisis in the insurance industry.
Corporations play a historic role in generating wealth but sometimes have a contentious impact on the environment and society as a whole. In recent years, corporations have become more sensitive to social issues and stakeholder concerns, and are collectively striving to become better corporate citizens (in some cases, compelled to do so by multiple stakeholders or government regulations). Business schools must prepare their graduates for success within these organizations by ensuring they are exposed to the best practices for implementing corporate sustainability initiatives and for measuring the social and financial impacts of these activities. This article provides implications for curriculum by examining recent editions of Corporate Finance/Financial Management and Financial and Managerial Accounting textbooks commonly used by undergraduate students in North America to see how much space is devoted to these topics. The study finds that Cost/Managerial Accounting textbooks have the highest coverage (frequencies) related to sustainability and environmental topics.
Butchey, Deanne, "Research on the influence of behavioral forces that motivate trader behavior and sentiment-a prospect theory exegesis" (2005 The dissertation emphasizes the need for specifying precise, testable models of investors' expectations by providing tools to identify paradoxical behavior patterns. True enhancements in this field must include empirical research utilizing reliable data sources to mitigate data mining problems and allow researchers to distinguish between expectations-based and risk-based explanations of behavior. Through this type of research, it may be possible to systematically exploit "irrational" market behavior.
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