Essays On CEO Compensation: New Evidence On The Managerial-Power Vs. Optimal Contracting Debate

This dissertation analyzes the effect of market analysts’ expectations of share prices (price targets) on executive compensation. It examines how well the estimated effects of price targets on compensation fit with two competing views on determining executive compensation: the arm’s length bargaining model, which assumes that a board seeks to maximize shareholders’ interests, and the managerial power model, which assumes that a board seeks to maximize managers’ compensation (Bebchuk et al. 2005). The first chapter documents the pattern of CEO pay from fiscal year 1996 to 2010. The second chapter analyzes the Institutional Broker Estimate System Detail History Price Target data file, which that reports analysts’ price targets for firms. I show that the number of price target announcements is positively associated with company share price’s volatility, that price targets are predictive of changes in the value of stocks, and that when analysts announce positive (negative) expectations of future stock price, share prices change in the same direction in the short run. The third chapter analyzes the effect of price targets on executive compensation. I find that analysts' price targets alter the composition of executive pay between cash-based compensation and stock-based compensation. When analysts forecast a rise (fall) in the share price for a firm, the compensation package tilts toward stock-based (cash-based) compensation. The substitution effect is stronger in companies that have weaker corporate governance. The fourth chapter explores the effect of the introduction of the Sarbanes-Oxley Act (SOX) in 2002 and its reinforcement in 2006 on the options granting process. I show that the introduction of SOX and its reinforcement eliminated the practice of backdating options but increased “spring-loading” of option grants around price targets announcements. Overall, the dissertation shows that price targets provide insights into the determinants of executive pay in favor of the managerial power model.

Kinematic models of interseismic deformation from inversion of GPS and InSAR measurements to estimate fault parameters and coupling degree

We have used kinematic models in two Italian regions to reproduce surface interseismic velocities obtained from InSAR and GPS measurements. We have considered a Block modeling, BM, approach to evaluate which fault system is actively accommodating the occurring deformation in both considered areas. We have performed a study for the Umbria-Marche Apennines, obtaining that the tectonic extension observed by GPS measurements is explained by the active contribution of at least two fault systems, one of which is the Alto Tiberina fault, ATF. We have estimated also the interseismic coupling distribution for the ATF using a 3D surface and the result shows an interesting correlation between the microseismicity and the uncoupled fault portions. The second area analyzed concerns the Gargano promontory for which we have used jointly the available InSAR and GPS velocities. Firstly we have attached the two datasets to the same terrestrial reference frame and then using a simple dislocation approach, we have estimated the best fault parameters reproducing the available data, providing a solution corresponding to the Mattinata fault. Subsequently we have considered within a BM analysis both GPS and InSAR datasets in order to evaluate if the Mattinata fault may accommodate the deformation occurring in the central Adriatic due to the relative motion between the North-Adriatic and South-Adriatic plates. We obtain that the deformation occurring in that region should be accommodated by more that one fault system, that is however difficult to detect since the poor coverage of geodetic measurement offshore of the Gargano promontory. Finally we have performed also the estimate of the interseismic coupling distribution for the Mattinata fault, obtaining a shallow coupling pattern. Both of coupling distributions found using the BM approach have been tested by means of resolution checkerboard tests and they demonstrate that the coupling patterns depend on the geodetic data positions.