Shahbaz A Sheikh

Do CEO Compensation Incentives Affect Firm Innovation?

Shahbaz A. Sheikh — Thu, 01 Mar 2012 14:34:50 PST

Corporate governance mechanisms and performance related CEO turnover

Atreya Chakraborty et al. — Thu, 23 Jun 2011 12:34:31 PDT

This study investigates the impact of corporate governance mechanisms on performance related turnover. Our results indicate that smaller boards and institutional block holders are positively related to the likelihood of performance related turnover. CEOs that also hold the position of the chairman of the board or belong to a founding family face lower likelihood of turnover. CEO stock ownership is negatively related to turnover and CEOs who own 3 percent or more of their company stock face a significantly lower likelihood of performance related turnover. Moreover, protection from external control market has no effect either on the likelihood of turnover.

Institutionalization of software product line: An empirical investigation of key organizational factors

Faheem Ahmed et al. — Thu, 23 Jun 2011 12:11:07 PDT

A good fit between the person and the organization is essential in a better organizational performance. This is even more crucial in case of institutionalization of a software product line practice within an organization. Employees’ participation, organizational behavior and management contemplation play a vital role in successfully institutionalizing software product lines in a company. Organizational dimension has been weighted as one of the critical dimensions in software product line theory and practice. A comprehensive empirical investigation to study the impact of some organizational factors on the performance of software product line practice is presented in this work. This is the first study to empirically investigate and demonstrate the relationships between some of the key organizational factors and software product line performance of an organization. The results of this investigation provide empirical evidence and further support the theoretical foundations that in order to institutionalize software product lines within an organization, organizational factors play an important role.

Determinants of asset ownership: Some evidence from the US trucking industry

Shahbaz A. Sheikh — Thu, 23 Jun 2011 12:04:39 PDT

This study empirically investigates the factors that affect a firm's asset ownership decisions - specifically buying vs. contracting out. Using a unique data on the US trucking industry, it is found that the use of sophisticated monitoring technologies provides firms with coordination and performance measurement tools and reduces the likelihood of the use of owner operators. Similarly, the less-than-trackload (LTL) segment of the industry and specialized assets result in vertical integration. On the other hand, contracting to owner operators is more likely for longer and time-sensitive hauls. Finally, firm size and profitability are negatively related to the choice of owner operators while fmancial leverage does not seem to have any impact on this choice. My results indicate that the predominance of company drivers in the trucking industry is a market response to the institutional set up of the trucking industry and can be explained by both the transaction costs and agency costs theories.

Repricing and executive turnover

Narayanan Subramanian et al. — Thu, 23 Jun 2011 11:54:12 PDT

We examine whether the threat of executive turnover faced by a firm affects its decision to reprice stock options held by its executives. We estimate a model of voluntary turnover among top executives and show that the predicted turnover from this model is positively related to the probability of repricing. The relationship is robust to the inclusion of several known determinants of repricing. Our results are consistent with a model in which a tight labor market makes executives hard to replace, forcing firms to reprice stock options when they go underwater.

Termination risk and managerial risk taking

Atreya Chakraborty et al. — Thu, 23 Jun 2011 11:42:36 PDT

We test the hypothesis that managers who face a high termination risk make less risky investments than the managers who face a low termination risk. A 10% increase in our measure of termination risk is associated with a 5%–23% decline in stock returns volatility for the median firm in our sample. We also find that for CEOs who are more likely to be fired in the event of investment failure, the inhibiting effect of termination risk appears to offset the positive effect of convexity of managerial compensation on managerial risk taking. These results are robust to alternative definitions of forced turnover and various measures of firm performances.

The relationship between incentive compensation and forced CEO turnover

Atreya Chakraborty et al. — Thu, 23 Jun 2011 11:38:23 PDT

We study the relationship between incentive compensation and performance related CEO turnover. Our theoretical model predicts that the slope of the compensation contract and forced turnover may be complements. Our results support this prediction. We find that incentives and turnover are positively related. This relationship however, varies with the equity ownership of CEOs and does not hold for CEOs who own more than 5% equity. Moreover, this relationship is stronger if the firm under performs its industry. Our results suggest that high-powered incentives may increase the signaling power of performance measures and lead to higher likelihood of turnover.

Antitakeover amendments and managerial entrenchment: New evidence from investment policy and CEO compensation

Atreya Chakraborty et al. — Thu, 23 Jun 2011 11:31:09 PDT

We explore the relation between antitakeover amendments and firm investment in long-term assets. Empirical results indicate that an increase in the G-index of Gompers et al. (2003) is associated with less investment in R&D and reduced capital expenditures. These results suggest that protection from takeover threat increases managerial entrenchment and results in underinvestment. We also find that this increased entrenchment is associated with higher total and cash compensation and fewer performance incentives for managers, suggesting that protected managers influence their own pay. These results are robust to a number of robustness checks and remain significant after controlling for industry effects. Overall, our results support the managerial entrenchment view—both investment decisions and CEO compensations reflect significant agency costs for firms with higher managerial entrenchment from antitakeover amendments.