CEO investment of deferred compensation plans and firm performance

Cambrea, Domenico Rocco; Colonnello, Stefano; Curatola, Giuliano; Fantini, Giulia

doi:10.1111/jbfa.12382

Cited by 5 publications

(1 citation statement)

References 46 publications

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“…Cambrea et al. (2019) show how CEO knowledge of firm performance impacts the value of deferred executive compensation plans. However, these talented executives have an outside option to leave the firm and use their expertise at another firm.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Measuring systematic risk from managerial organization capital

Yildirim

Allen

2021

Business Fin & Account

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Organization capital (OC) constitutes a firm's unique, hard‐to‐mimic, hard‐to‐transfer culture, internal knowledge and language, policies and procedures, growth opportunities and information technology, brand name and any other aspects that are not directly related to the production process. In order to disentangle value enhancement from agency costs inherent in the OC, we calibrate systematic risk premiums from the loss of managerial OC rents by decomposing OC into: (1) portable economic rents in the form of disclosed executive compensation and (2) a strategic component that comprised undisclosed, non‐portable OC rents mixed with agency costs. Shareholders in firms with high strategic component (not the portable component) earn an annual systematic risk premium of 4.6%. Disclosures revealing the breakdown between OC and agency costs in the strategic component (earnings surprises, managerial obfuscation and stock mispricing) as well as corporate governance eliminate this risk premium by revealing the OC rents in strategic component and increasing OC portability.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Measuring systematic risk from managerial organization capital

Yildirim

Allen

2021

Business Fin & Account

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Inside debt and firm risk‐taking: Evidence from the UK pension reform

Zhao

2020

Business Fin & Account

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This paper provides new evidence on the relation between CEO inside debt and firm risk‐taking by exploiting the change in the tax treatment of UK pensions following two pension amendments. The 2006 pension reform introduces the annual and lifetime allowance for UK pension schemes, significantly increasing income taxes associated with CEO inside debt. The 2011 allowance cut, which substantially reduces the annual allowance introduced in 2006, further increases income taxes on inside debt. We find that CEO inside debt, in the form of executive pensions declines after the 2006 reform while cash‐in‐lieu increases significantly. This effect is more severe after the 2011 allowance cut than the 2006 pension reform. UK firms appear to substitute away from pensions towards cash‐in‐lieu, where income taxes are less punishing. If the association between CEO inside debt and firm risk‐taking is causal, we should observe a change of risk‐taking after the decline of inside debt. Our results, which exploit the exogenous nature of the reforms, show that the decline of CEO pensions does not lead to any change in firm risk‐taking. This result suggests that no causal relationship exists between CEO inside debt and firm risk‐taking. Our results extend the inside debt literature, where empirical evidence is mainly documented in the US. Contrary to findings in the US, our evidence suggests that the use of CEO inside debt is motivated to minimise income tax rather than a tool to moderate firm risk.

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The Intangible Value of Key Talent: Decomposing Organization Capital

Yildirim

Allen

2017

SSRN Journal

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CEO investment of deferred compensation plans and firm performance

Cited by 5 publications

References 46 publications

Measuring systematic risk from managerial organization capital

Measuring systematic risk from managerial organization capital

Inside debt and firm risk‐taking: Evidence from the UK pension reform

The Intangible Value of Key Talent: Decomposing Organization Capital

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