Investment opportunities and the structure of executive compensation

Article Abstract:

Smith and Watts' (1992) contracting paradigm of the firm is extended to examine cross-sectional links between investment opportunities and the impact of performance measures on executive compensation. The study tests the hypotheses that the links between pay and performance are greater in companies with greater investment opportunities, and that market-based performance indicators are used more often than accounting-based indicators to determine incentive payments when investment opportunities account for a substantial portion of the company's value. The findings support these hypotheses.

Investments, Compensation management, Executives, Executive compensation

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Accounting earnings and executive compensation: the role of earnings persistence

Article Abstract:

CEO cash compensation data from proxy statements for 713 publicly traded US firms were analyzed to examine the relation between compensation and corporate earnings. It was found that CEO cash compensation is sensitive to earnings and that this sensitivity varies with earnings persistence and is greater in situations where in the executive is near retirement. Results also suggested that earnings persistence is not relevant to stock-based compensation components.

Wages, Analysis, Profits, Chief executive officers, Wages and salaries, Corporate profits

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Estimates of economic rates of return for the U.S. pharmaceutical industry, 1976-1987

Article Abstract:

A comprehensive approach is presented that is intended to facilitate the estimation of an industry's economic rates of return using accounting data. The methodology is illustrated through an examination of the profitability of the US pharmaceutical industry during the period 1976-1987. Findings show that returns in the pharmaceutical industry are higher than returns for comparable industrial companies by 2.1% to 3.8%.

Pharmaceutical Preparation Manufacturing, Pharmaceutical preparations, Pharmaceutical industry, Drugs, Finance, Return on investment, Rate of return

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