Non-Executive Employee Ownership and Corporate Risk

Bova, Francesco; Kolev, Kalin S.; Thomas, Jacob K.; Zhang, X. Frank

doi:10.2308/accr-50860

Cited by 90 publications

(65 citation statements)

References 47 publications

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“…Note that because firm performance and compensation decisions likely are jointly determined, I take steps to alleviate concerns about endogeneity. To mitigate simultaneity, Adj RNOA is measured in year t+1 in all my regressions, with Adj RNOA t included as an independent variable in all regressions to control for omitted variables (Bova et al 2015). I include firm fixed effects to control for time-invariant firm characteristics and year fixed effects to control for aggregate time-series trends.…”

Section: Pay Ratios and Firm Performancementioning

confidence: 99%

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Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance

Rouen

2019

The Accounting Review

115

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I develop measures of firm-level pay disparity and examine their relation to firm performance. Using comprehensive compensation data for a large sample of firms, I find no statistically significant relation between the ratio of CEO-to-mean employee compensation and performance. I next create empirical models that allow me to separate the components of CEO and employee compensation explained by economic factors from those that are not, and use these models to estimate explained and unexplained pay disparity. After validating my estimate of unexplained pay disparity as a proxy for pay fairness, I find robust evidence of a negative (positive) relation between unexplained (explained) pay disparity and future firm performance. JEL Classifications: G32; G35; J31; M12; M14; M52.

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Section: Pay Ratios and Firm Performancementioning

confidence: 99%

“…Second, I include firm fixed effects in my regressions to control for unobservable time-invariant firm characteristics. Third, I include contemporaneous Adj RNOA among the independent variables to control for potential omitted variables(Bova, Kolev, Thomas, and Zhang 2015). Fourth, I redo my tests using industry-adjusted ratios(Bebchuk et al 2011).…”

mentioning

confidence: 99%

Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance

Rouen

2019

The Accounting Review

115

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“…This result is different from the findings of previous studies, which reveal that firms with greater stock return volatility are more likely to carry D&O insurance because they have a greater likelihood of being the target of shareholder litigation. Our evidence suggests that insofar as stock return volatility proxies for the firm's risk-taking behavior (Rajgopal and Shevlin, 2002;Coles, Daniel, and Naveen, 2006;Low 2009;Cassell et al, 2012;Hirshleifer, Low, and Teoh, 2012;Kini and Williams, 2012;Bova et al, 2014), firms that take on higher risk are not necessarily more likely to purchase D&O insurance.…”

Section: Determinants Of Dando Insurancementioning

confidence: 89%

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE AND FIRM VALUE

Hwang¹,

Kim²

2016

J of Risk & Insurance

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This study examines the effect of directors' and officers' liability (D&O) insurance on firm value. Previous studies are divided on the value implication of D&O insurance: some argue for various benefits of being covered by D&O insurance, whereas others focus on the managerial opportunism stemming from being insured. In order to address whether D&O insurance increases firm value, we utilize a sample of quoted Korean companies from a period in which the disclosure of D&O insurance information was mandatory and there was a significant cross‐sectional variation in the firms' coverage of D&O insurance. We find that controlling for the endogeneity of D&O insurance coverage, D&O insurance increases firm value compared to noninsured firms. We also find evidence that the increase in firm value is pronounced for firms with greater growth opportunities, which suggests that D&O insurance can help firms to better convert growth opportunities into higher firm value.

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“…The data come from the Center for Research on Security Prices. As a robustness check, I considered an alternative empirical proxy: the volatility of accounting rates of return, calculated as the seasonally differenced quarterly ROA over the subsequent 5 years, where ROA is income before extraordinary items, scaled by average total assets for the quarter (see Bova, Kolev, Thomas, & Zhang, 2014). These data come from…”

Section: Controlsmentioning

confidence: 99%

Risky Business: The Decline of Defined Benefit Pensions and Firms’ Shifting of Risk

Cobb

2015

Organization Science

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Since the early 1980s, employment in the United States has undergone significant transformation as the large corporations that once safeguarded employees with stable jobs and rewards for loyalty have replaced these employment relationships with ones based on cost containment and flexibility. One important consequence of these developments is that firms have abdicated their role as a critical risk bearer in society. Although evidence suggests that firms have increasingly shifted market risks onto their workforce, to date, there have been few detailed analyses exploring what factors have driven this phenomenon. This study adds to our understanding of why firms have transferred risk to their employees by examining the decline of a highly institutionalized practice wherein large U.S. firms used to bear retirement risk: the defined benefit (DB) pension plan. Through a detailed analysis, I show that variance in the presence, power, and interests of shareholders and employees at the firm level differentially affect a firm’s willingness to shift the risk of retirement onto its workers. Specifically, I demonstrate empirically that different types of shareholders have differential effects on a firm’s retirement practices, suggesting that the changing equity ownership structure of large U.S. firms has played a key role in how risk is allocated between workers and firms. Declines in employee power have also played a role because firm levels of unionization positively affect rates of DB participation for both unionized and nonunionized workers.

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Non-Executive Employee Ownership and Corporate Risk

Cited by 90 publications

References 47 publications

Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance

Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE AND FIRM VALUE

Risky Business: The Decline of Defined Benefit Pensions and Firms’ Shifting of Risk

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