Executive pensions, disclosure quality, and rent extraction

The CEO as chief political officer: Managerial discretion and corporate political activity

“…First, we included CEO tenure as it reflects a CEO's increasing authority and ability to direct the firm based on her/his own views (Allgood & Farrell, 2000;Henderson, Miller, & Hambrick, 2006;Miller, 1991). Second, we included CEO dualitythat is, CEOs serving on the board as the chairperson or as a board member, which represents a significant opportunity for the CEO to influence the board and thus undermine its monitoring role (Kalyta & Magnan, 2008;Wade, O'Reilly, & Pollock, 2006). Third, we included CEO longterm incentive plans (LTIP), which consists of non-salary incentives such as equity and bonuses; and fourth, we included CEOs' base salary, as two related proxies for the discretion of the chief executive and her/his influence over board decisions (Bebchuk & Fried, 2004;Bebchuk, Fried, & Walker, 2002;Torsi & Gomez-Mejia, 1989).…”

Valuation of firms that disclose related party transactions

“…McTague (2004) noted the role loans to related parties played in the demise of the financial sector crisis of the late 1980's and early 1990's and Cullinan et al (2006) document an association between loans to executives and financial restatements. In related research, Kalyta and Magnan (2008) document that powerful CEOs extract rents using executive pensions where the disclosures are of lower quality. Erickson et al (2000) also describe in detail how RP transactions enabled Lincoln Savings and Loan to meet important regulatory capital constraints, but later led to its collapse.…”

Strategic revelation of differences in segment earnings growth

“…Investors and directors use financial accounting information to monitor managers and to reduce such agency costs (Bushman and Smith, 2001;Healy and Palepu, 2001). This provides managers with incentives to engage in 'strategic' reporting that limits the monitoring usefulness of accounting information (Kalyta and Magnan, 2008). In the segment reporting literature, Berger and Hann (2007) find that companies' disclosure of 'new' segments, when adopting FAS 131, is associated with companies' subsidization of capital expenditures made by previously concealed, poorly-performing segments.…”