Human capital and agency effects on CEO compensation of IPO biopharmaceutical firms and the market’s response

Abstract

This paper examines the determinants of base pay and total incentive compensation packages of CEOs of biopharmaceutical firms that have recently gone public, and whether human capital and agency factors affect the market's response to the initial public offering. We find that in terms of net proceeds, the IPO market appears to reward the firms that have founder-CEOs and CEOs with higher incentive compensation. CEOs with prior venture capital experience are associated with receiving higher incentive compensation, while CEOs with a greater ownership interest in the firm receive lower incentive compensation but higher salaries. CEOs of firms with a greater percentage of insiders are associated with lower salaries. The results should add to our understanding related to human capital and agency theories, as well as help firms and investors better understand and structure CEO compensation.

A theoretical analysis of the value added intellectual coefficient (VAIC)

“…Second, the paper positions the role of the governance system at the core of the VAIC and discusses how the overlapping of the production and distribution perspectives on value added generates ambiguity in the meaning of HCE. The role of corporate governance for the effective management of IC has been widely recognised (Volontè and Gantenbein 2016;Williams et al 2018;Zambon et al 2019), but the VAIC considers it as a residual to be confined to the definition of the only structural capital. The analysis carried out here demonstrates, instead, that even human capital efficiency depends on the governance structure of the firm and the power the firm has in bargaining with its employees.…”

A critical validation of the value added intellectual coefficient: use in empirical research and comparison with alternative measures of intellectual capital

“…2015). Directors' human capital positively influences firm performance (Volontè and Gantenbein, 2016), board turnover after an incident of fraud (D'Onza and Rigolini, 2017), and compensation after IPO (Williams et al, 2018). The level of human capital can also positively influence internationalization (Cerrato and Piva, 2012).…”