The impact of CEO compensation and CEO horizon on a firm's discretionary research and development expenditures

Agency costs are said to arise as a result of the separation of ownership from control inherent in the corporate form of ownership. One such agency problem concerns the potential variance between the time horizons of principal shareholders and agent managers. Agency theory suggests that these costs can be alleviated or controlled through performance-based Chief Executive Officer (CEO) contracting. However, components of a CEO's compensation contract can exacerbate or mitigate agency-related problems (Antle and Smith, 1985). According to the horizon hypothesis, a self-serving CEO reduces discretionary research and development (R&D) expenditures to increase earnings and earnings-based bonus compensation. Agency theorists contend that a CEO's market-based compensation component can mitigate horizon problems. This study seeks to determine whether there is a relationship between CEO earnings- and market-based compensation components and R&D expenditures in the largest United States industrial firms from 1987 to 1993.^ Consistent with the horizon hypothesis, results provide evidence of a negative and statistically significant relationship between CEO cash compensation (i.e., salary and bonus) and the firm's R&D expenditures. Consistent with the expectations of agency theory, results provide evidence of a positive and statistically significant relationship between market-based CEO compensation and R&D.^ Further results of this study provide evidence of a positive and statistically significant relationship between CEO tenure and the firm's R&D expenditures. Although there is a negative relationship between CEO age and the firm's R&D, it was not statistically significant at the 0.5 level. ^

High performance shift invariant motion estimation and compensation in wavelet domain video compression

The contributions of this dissertation are in the development of two new interrelated approaches to video data compression: (1) A level-refined motion estimation and subband compensation method for the effective motion estimation and motion compensation. (2) A shift-invariant sub-decimation decomposition method in order to overcome the deficiency of the decimation process in estimating motion due to its shift-invariant property of wavelet transform. ^ The enormous data generated by digital videos call for an intense need of efficient video compression techniques to conserve storage space and minimize bandwidth utilization. The main idea of video compression is to reduce the interpixel redundancies inside and between the video frames by applying motion estimation and motion compensation (MEMO) in combination with spatial transform coding. To locate the global minimum of the matching criterion function reasonably, hierarchical motion estimation by coarse to fine resolution refinements using discrete wavelet transform is applied due to its intrinsic multiresolution and scalability natures. ^ Due to the fact that most of the energies are concentrated in the low resolution subbands while decreased in the high resolution subbands, a new approach called level-refined motion estimation and subband compensation (LRSC) method is proposed. It realizes the possible intrablocks in the subbands for lower entropy coding while keeping the low computational loads of motion estimation as the level-refined method, thus to achieve both temporal compression quality and computational simplicity. ^ Since circular convolution is applied in wavelet transform to obtain the decomposed subframes without coefficient expansion, symmetric-extended wavelet transform is designed on the finite length frame signals for more accurate motion estimation without discontinuous boundary distortions. ^ Although wavelet transformed coefficients still contain spatial domain information, motion estimation in wavelet domain is not as straightforward as in spatial domain due to the shift variance property of the decimation process of the wavelet transform. A new approach called sub-decimation decomposition method is proposed, which maintains the motion consistency between the original frame and the decomposed subframes, improving as a consequence the wavelet domain video compressions by shift invariant motion estimation and compensation. ^

The impact of institutional complexity and top management characteristics on executive compensation and firm performance

While most studies take a dyadic view when examining the environmental difference between the home country of a multinational enterprise (MNE) and a particular foreign country, they ignore that an MNE is managing a network of subsidiaries embedded in diverse environments. Additionally, neither the impacts of global environments on top executives nor the effects of top executives’ capabilities to handle institutional complexity are fully explored. Thus, using a three-essay format, this dissertation tried to fill these gaps by addressing the effects of institutional complexity and top management characteristics on top executive compensation and firm performance. ^ Essay 1 investigated the impact of an MNE’s institutional complexity, or the diversity of national institutions facing an MNE’s network of subsidiaries, on the top management team (TMT) compensation. This essay proposed that greater political and cultural complexity leads to not only greater TMT total compensation but also to a greater portion of TMT compensation linked with long-term performance. The arguments are supported in this essay by using an unbalanced panel dataset including 296 U.S. firms with 1,340 observations. ^ Essay 2 explored TMT social capital and its moderating role on value creation and appropriation by the chief executive officer (CEO). Using a sample with 548 U.S. firms and 2,010 observations, it found that greater TMT social capital does facilitate the effects of CEO intellectual capital and social capital on firm growth. Finally, essay 3 examined the performance implications for the fit between managerial information-processing capabilities and institutional complexity. It proposed that institutional complexity is associated with the needs of information-processing. On the other hand, smaller TMT turnover and larger TMT size reflect larger managerial information-processing capabilities. Consequently, superior performance is achieved by the match among institutional complexity, TMT turnover, and TMT size. All hypotheses in essay 3 are supported in a sample of 301 U.S. firms and 1,404 observations. ^ To conclude, this dissertation advances and extends our knowledge on the roles of institutional environments and top executives on firm performance and top executive compensation.^

Management Compensation as a Value-Added Competitive Method for Casual Theme Restaurants

The primary purpose of this study is to propose that the management compensation package at Outback Steakhouse is a value-adding competitive method. Specifically the research focused on a survey of general manager's altitudes in regards to their intentions to seek out new employment and the effect of the compensation plan provided by Outback Steakhouse on the managers' intentions. This research will provide insight into the use of compensation packages and programs as proactive, value-adding competitive methods in retaining good quality managers it casual theme restaurants.

Can Compensation Committees Effectively Mitigate the CEO Horizon Problem? The Role of Co-opted Directors

Extant research finds inconclusive evidence about the CEO horizon problem. One possibility is that compensation committees design CEO compensation in a way that discourages retiring CEOs from opportunistic earnings management and R&D reduction. However, compensation committees dominated by co-opted directors may not be as effective as those with fewer co-opted directors in mitigating the CEO horizon problem, because directors co-opted by the CEO tend to bias their decisions in favor of the CEO. I find that compensation committees dominated by co-opted directors are associated with higher CEO compensation packages. I document R&D reduction and accruals management in firms with retiring CEOs and compensation committees dominated by co-opted directors, and find that R&D reduction and income-increasing accruals are less discouraged by compensation committees dominated by co-opted directors when deciding CEO compensation. I also examine the effect of boards of directors and compensation committee characteristics on CEO compensation and on mitigating the CEO horizon problem. I find that CEO compensation positively associates with CEO power, director independence, and the percentage of busy directors, and negatively associates with board of directors and committee size and director ownership. Moreover, I find that retiring CEOs are more likely to reduce R&D expenditures when CEOs have more power, and director tenure is longer; retiring CEOs in firms with large boards of directors and compensation committees are less likely to manage accruals.