Essays on behavioral aspects of the design and disclosure of compensation contracts

This thesis consists of four essays on the design and disclosure of compensation contracts. Essays 1, 2 and 3 focus on behavioral aspects of mandatory compensation disclosure rules and of contract negotiations in agency relationships. The three experimental studies develop psychology- based theory and present results that deviate from standard economic predictions. Furthermore, the results of Essay 1 and 2 also have implications for firms’ discretion in how to communicate their top management’s incentives to the capital market. Essay 4 analyzes the role of fairness perceptions for the evaluation of executive compensation. For this purpose, two surveys targeting representative eligible voters as well as investment professionals were conducted. Essay 1 investigates the role of the detailed ‘Compensation Discussion and Analysis’, which is part of the Security and Exchange Commission’s 2006 regulation, on investors’ evaluations of executive performance. Compensation disclosure complying with this regulation clarifies the relationship between realized reported compensation and the underlying performance measures and their target achievement levels. The experimental findings suggest that the salient presentation of executives’ incentives inherent in the ‘Compensation Discussion and Analysis’ makes investors’ performance evaluations less outcome dependent. Therefore, investors’ judgment and investment decisions might be less affected by noisy environmental factors that drive financial performance. The results also suggest that fairness perceptions of compensation contracts are essential for investors’ performance evaluations in that more transparent disclosure increases the perceived fairness of compensation and the performance evaluation of managers who are not responsible for a bad financial performance. These results have important practical implications as firms might choose to communicate their top management’s incentive compensation more transparently in order to benefit from less volatile expectations about their future performance. Similar to the first experiment, the experiment described in Essay 2 addresses the question of more transparent compensation disclosure. However, other than the first experiment, the second experiment does not analyze the effect of a more salient presentation of contract information but the informational effect of contract information itself. For this purpose, the experiment tests two conditions in which the assessment of the compensation contracts’ incentive compatibility, which determines executive effort, is either possible or not. On the one hand, the results suggest that the quality of investors’ expectations about executive effort is improved, but on the other hand investors might over-adjust their prior expectations about executive effort if being confronted with an unexpected financial performance and under-adjust if the financial performance confirms their prior expectations. Therefore, in the experiment, more transparent compensation disclosure does not lead to more correct overall judgments of executive effort and to even lower processing quality of outcome information. These results add to the literature on disclosure which predominantly advocates more transparency. The findings of the experiment however, identify decreased information processing quality as a relevant disclosure cost category. Firms might therefore carefully evaluate the additional costs and benefits of more transparent compensation disclosure. Together with the results from the experiment in Essay 1, the two experiments on compensation disclosure imply that firms should rather focus on their discretion how to present their compensation disclosure to benefit from investors’ improved fairness perceptions and their spill-over on performance evaluation. Essay 3 studies the behavioral effects of contextual factors in recruitment processes that do not affect the employer’s or the applicant’s bargaining power from a standard economic perspective. In particular, the experiment studies two common characteristics of recruitment processes: Pre-contractual competition among job applicants and job applicants’ non-binding effort announcements as they might be made during job interviews. Despite the standard economic irrelevance of these factors, the experiment develops theory regarding the behavioral effects on employees’ subsequent effort provision and the employers’ contract design choices. The experimental findings largely support the predictions. More specifically, the results suggest that firms can benefit from increased effort and, therefore, may generate higher profits. Further, firms may seize a larger share of the employment relationship’s profit by highlighting the competitive aspects of the recruitment process and by requiring applicants to make announcements about their future effort. Finally, Essay 4 studies the role of fairness perceptions for the public evaluation of executive compensation. Although economic criteria for the design of incentive compensation generally do not make restrictive recommendations with regard to the amount of compensation, fairness perceptions might be relevant from the perspective of firms and standard setters. This is because behavioral theory has identified fairness as an important determinant of individuals’ judgment and decisions. However, although fairness concerns about executive compensation are often stated in the popular media and even in the literature, evidence on the meaning of fairness in the context of executive compensation is scarce and ambiguous. In order to inform practitioners and standard setters whether fairness concerns are exclusive to non-professionals or relevant for investment professionals as well, the two surveys presented in Essay 4 aim to find commonalities in the opinions of representative eligible voters and investments professionals. The results suggest that fairness is an important criterion for both groups. Especially, exposure to risk in the form of the variable compensation share is an important criterion shared by both groups. The higher the assumed variable share, the higher is the compensation amount to be perceived as fair. However, to a large extent, opinions on executive compensation depend on personality characteristics, and to some extent, investment professionals’ perceptions deviate systematically from those of non-professionals. The findings imply that firms might benefit from emphasizing the riskiness of their managers’ variable pay components and, therefore, the findings are also in line with those of Essay 1.

Long-term Success of Family Firms: Investigating Specific Aspects of Firm-level Entrepreneurship and Individual-level Antecedents

Long-term success of family firms is of utmost social and economic importance. Three of its determinants are in the center of this Dissertation: firmlevel entrepreneurial orientation (EO), managers' entrepreneurial behavior, and value-creating attitudes of non-family employees. Each determinant and respective research gaps are addressed by one paper of this cumulative dissertation. Referring to firm-level EO, scholars claim that EO is a main antecedent to firms' both short- and long-term success. However, family firms seem to be successful across generations despite rather low levels of EO. The first paper addresses this paradox by investigating EO patterns of long-lived family firms in three Swiss case studies. The main finding is that the key to success is not to be as entrepreneurially as possible all the time, but to continuously adapt the EO profile depending on internal and external factors. Moreover, the paper suggest new subcategories to different EO dimensions. With regard to entrepreneurial behavior of managers, there is a lack of knowledge how individual-level and organizational level factors affect its evolvement. The second paper addresses this gap by investigating a sample of 403 middle-level managers from both family and non-family firms. It introduces psychological ownership of managers as individual-level antecedent and investigates the interaction with organizational factors. As a central insight, management support is found to strengthen the psychological ownership-entrepreneurial behavior relationship. The third paper is based on the fact that employees' justice perceptions are established antecedents of value-creating employee attitudes such as affective commitment and job satisfaction. Even though family firms are susceptible to nonfamily employees´ perceptions of injustice, corresponding research is scarce. Moreover, the mechanism connecting justice perceptions and positive outcomes is still unclear. Addressing these gaps, the analysis of a sample of 310 non-family employees reveals that psychological ownership is a mediator in the relationships between distributive justice perceptions and both affective commitment and job satisfaction. Altogether, the three papers offer valuable contributions to family business literature with respect to EO, entrepreneurial behavior, and value-creating employee attitudes. Thus, they increase current understanding about important determinants of family firms' long-term success, while opening up numerous ways of future research.

A systematic review of the performance of ceramic and metal implant abutments supporting fixed implant reconstructions

OBJECTIVES: The objective of this systematic review was to assess the 5-year survival rates and incidences of complications associated with ceramic abutments and to compare them with those of metal abutments. METHODS: An electronic Medline search complemented by manual searching was conducted to identify randomized-controlled clinical trials, and prospective and retrospective studies providing information on ceramic and metal abutments with a mean follow-up time of at least 3 years. Patients had to have been examined clinically at the follow-up visit. Assessment of the identified studies and data abstraction was performed independently by three reviewers. Failure rates were analyzed using standard and random-effects Poisson regression models to obtain summary estimates of 5-year survival proportions. RESULTS: Twenty-nine clinical and 22 laboratory studies were selected from an initial yield of 7136 titles and data were extracted. The estimated 5-year survival rate of ceramic abutments was 99.1% [95% confidence interval (CI): 93.8-99.9%] and 97.4% (95% CI: 96-98.3%) for metal abutments. The estimated cumulative incidence of technical complications after 5 years was 6.9% (95% CI: 3.5-13.4%) for ceramic abutments and 15.9% (95% CI: 11.6-21.5%) for metal abutments. Abutment screw loosening was the most frequent technical problem, occurring at an estimated cumulative incidence after 5 years of 5.1% (95% CI: 3.3-7.7%). All-ceramic crowns supported by ceramic abutments exhibited similar annual fracture rates as metal-ceramic crowns supported by metal abutments. The cumulative incidence of biological complications after 5 years was estimated at 5.2% (95% CI: 0.4-52%) for ceramic and 7.7% (95% CI: 4.7-12.5%) for metal abutments. Esthetic complications tended to be more frequent at metal abutments. A meta-analysis of the laboratory data was impossible due to the non-standardized test methods of the studies included. CONCLUSION: The 5-year survival rates estimated from annual failure rates appeared to be similar for ceramic and metal abutments. The information included in this review did not provide evidence for differences of the technical and biological outcomes of ceramic and metal abutments. However, the information for ceramic abutments was limited in the number of studies and abutments analyzed as well as the accrued follow-up time. Standardized methods for the analysis of abutment strength are needed.

"Is there a doctor on board?" - legal aspects of medical care in emergency situations during spare time

Medical emergencies on international flights are not uncommon. In these situations the question often arises whether physicians are obliged to render first aid and whether omission leads to legal consequences. The general obligation to aid those in need applies to everyone, not only to physicians. Evading this duty makes liable to prosecution for omittance of defence of a third person in line with Art. 128 of the Swiss Penal Code, punishable by custodial sentence up to three years or an equivalent punitive fine. Vocational and professional law extend the duty to aid for physicians to urgent cases. Although resulting from the performance of a legal obligation, malpractice occurred in the course of first aid can lead to claims for compensation - even from foreign patients, and that according to their own domestic law.

Differential aspects of memory self-evaluation in old and very old people

The aim of this paper was to examine age-related changes and gender differences in memory self-evaluation in old people and to examine the predictive power of objective memory performance and of personality variables (neuroticism and extraversion) on memory self-evaluation. In a cross-sectional study, 301 not institutionalized people aged 65± 94, 207 male and 94 female, were tested on three parameters. Subjective memory evaluation was operationalized with three one-item ratings: temporal comparison, social comparison, situation-speci® c memory self-evaluation just after performing a memory test. Objective memory assessment (free recall) used a computerized test. Personality assessment included the two main sub-scales `extraversion’ and `neuroticism’ from the Freiburger PersoÈ nlichkeits-Inventar.The results shaved that persons of all age groups have a realistic appraisal of their age-related memory decline.No gender effects were found for any of the three forms of memory self-evaluation. The relationship between objective memory performance, personality variables and memory self-evaluation however depends on age and gender. Our results show that objective memory performance is predictive for memory self-evaluation in men aged >75 years, whereas in men <75 neuroticism is the only signi® cant predictor.Men of the older cohort seem to have adapted to the age-related memory decline whereas the young old are still coping with the ongoing changes. In women of both age groups the objective memory performance is the only and strong predictor of memory self-evaluation. Our results suggest that gender-speci® c educational socialization might be the reason for these differences.

How do different aspects of self-regulation predict successful adaptation to school?

Self-regulation plays an important role in successful adaptation to preschool and school contexts as well as in later academic achievement. The current study relates different aspects of self-regulation such as temperamental effortful control and executive functions (updating, inhibition, and shifting) to different aspects of adaptation to school such as learning-related behavior, school grades, and performance in standardized achievement tests. The relationship between executive functions/effortful control and academic achievement has been established in previous studies; however, little is known about their unique contributions to different aspects of adaptation to school and the interplay of these factors in young school children. Results of a 1-year longitudinal study (N = 459) revealed that unique contributions of effortful control (parental report) to school grades were fully mediated by children’s learning-related behavior. On the other hand, the unique contributions of executive functions (performance on tasks) to school grades were only partially mediated by children’s learning-related behavior. Moreover, executive functions predicted performance in standardized achievement tests exclusively, with comparable predictive power for mathematical and reading/writing skills. Controlling for fluid intelligence did not change the pattern of prediction substantially, and fluid intelligence did not explain any variance above that of the two included aspects of self-regulation. Although effortful control and executive functions were not significantly related to each other, both aspects of self-regulation were shown to be important for fostering early learning and good classroom adjustment in children around transition to school.