Comments on Shan and Walter: ‘Towards a Set of Design Principles for Executive Compensation Contracts’

Beaumont, Stacey; Ratiu, Raluca Valeria; Reeb, David M.; Boyle, Glenn W.; Brown, Philip; Szimayer, Alexander; Rosa, Raymond Silva; Hillier, David; McColgan, Patrick; Tsekeris, Athanasios; Howieson, Bryan; Matolcsy, Zoltan; Spiropoulos, Helen; Roberts, John D.; Smith, Tom W.; Zhou, Qing; Swan, Peter L.; Taylor, Stephen L.; Wright, Sue; Yermack, David

doi:10.1111/abac.12091

Cited by 4 publications

(3 citation statements)

References 228 publications

(287 reference statements)

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“…As pointed out by Jones (), executive compensation variables are another set of factors that have not been investigated in prior bankruptcy research. The issue of excessive executive compensation, particularly in distressed and failing companies, has been a controversial in the Western financial press and much contested in public policy, particularly since the global financial crisis (see Beaumont et al ., ; Jones, and Shan and Walter, ; Grosse et al ., ). Banker et al .…”

Section: Institutional Background Of China and Prior Literaturementioning

confidence: 99%

Corporate distress prediction in China: a machine learning approach

Jiang

Jones

2018

Accounting & Finance

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Rapid growth and transformation of the Chinese economy and financial markets coupled with escalating default rates, rising corporate debt and poor regulatory oversight motivates the need for more accurate distress prediction modelling in China. Given China's historical, social and cultural intolerance towards corporate failure, this study examines the Special Treatment system introduced by Chinese regulators in 1998. Regulators can assign Special Treatment status to listed Chinese companies for poor financial performance, financial abnormality and other events. Using an advanced machine learning model known as TreeNet Ò we model more than 90 predictor variables, including financial ratios, market returns, macro-economic indicators, valuation multiples, audit quality factors, shareholder ownership/control, executive compensation variables, corporate social responsibility metrics and other variables. Based on out-of-sample tests, our TreeNet Ò model is 93.74 percent accurate in predicting distress (a Type I error rate of 6.26 percent) and 94.81 percent accurate in predicting active/healthy companies (a Type II error rate of 5.19 percent). Variables with the strongest predictive value in the TreeNet Ò model includes market capitalization and annual market returns, macro-economic variables such as gross domestic product growth, financial ratios such as retained earnings to total assets and return on assets; and certain non-traditional variables such as executive compensation.

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Section: Institutional Background Of China and Prior Literaturementioning

confidence: 99%

Corporate distress prediction in China: a machine learning approach

Jiang

Jones

2018

Accounting & Finance

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“…This case is not the only example illustrating that stocks issued to employees or call options written on the company's stocks are important instruments of equity-based executive compensation. Executive compensation is intensively discussed in the literature, and the volume of compensation payouts, in particular, remains a controversial topic (Beaumont et al, 2016;Shan andWalter, 2016a, 2016b). Irving et al (2011) and Murphy (2013) show that since the start of the new millennium, an increasing number of equity-based plans have been established.…”

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confidence: 99%

Executive Compensation and Company Valuation

Schueler

2020

Abacus

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In the literature, the integration of the cash and risk effects of executive compensation into company valuation is discussed only marginally. This paper addresses the question of how these effects can be integrated into corporate valuation. Several methods for solving the problem are discussed and a method free of circular references, similar to the adjusted present value approach to company valuation, is identified. Contrary to a common assumption in the literature, there is no uniform and constant cost of capital for a company that uses employee stock options. Cost of capital needs to be adjusted to the cash and risk impact of equity-based executive compensation. Making recourse to the treasury stock method, which is used to calculate diluted earnings per share, is not recommended here even though a corrected version of this method is used. I discuss different forms of equity-based executive compensation, including the resulting allocation of risk and net present value between owners and managers.

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“…9 An alternate benchmark is to compare CEO pay to individuals in other fields who are remunerated for unique and specialised skill sets. In a comparison of CEOs to highly paid athletes, Beaumont et al (2016) find that from 2009 to 2013, the highest paid US athletes are paid more than the highest paid US CEOs, however in Australia this is not the case.…”

Section: Determinants Of Level Of Executive Remunerationmentioning

confidence: 92%

Executive Remuneration: Achieving Accountability through Disclosure

Beaumont¹

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Comments on Shan and Walter: ‘Towards a Set of Design Principles for Executive Compensation Contracts’

Cited by 4 publications

References 228 publications

Corporate distress prediction in China: a machine learning approach

Corporate distress prediction in China: a machine learning approach

Executive Compensation and Company Valuation

Executive Remuneration: Achieving Accountability through Disclosure

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