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Managerial incentives and firm perfo...

Bouresli, Amani Khaled.

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Managerial incentives and firm performance: Evidence from initial public offerings.

Record Type:	Electronic resources : Monograph/item
Title/Author:	Managerial incentives and firm performance: Evidence from initial public offerings./
Author:	Bouresli, Amani Khaled.
Published:	Ann Arbor : ProQuest Dissertations & Theses, : 2001,
Description:	209 p.
Notes:	Source: Dissertations Abstracts International, Volume: 64-05, Section: A.
Contained By:	Dissertations Abstracts International64-05A.
Subject:	Finance. -
Online resource:	https://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=3058594
ISBN:	9780493739076

Managerial incentives and firm performance: Evidence from initial public offerings.
Bouresli, Amani Khaled.

Managerial incentives and firm performance: Evidence from initial public offerings. - Ann Arbor : ProQuest Dissertations & Theses, 2001 - 209 p.

Source: Dissertations Abstracts International, Volume: 64-05, Section: A.

Thesis (Ph.D.)--Southern Illinois University at Carbondale, 2001.

An initial public offering (IPO) generally represents the largest equity issue in a firm's life and the beginning of the transformation process for firms from private to public ownership, which will enforce a major change in the principal-agent relationship. While there have been studies focusing on the principal-agent relationship, the role of executive compensation subsequent to IPOs has not been explored extensively in the literature. In this dissertation, I examine the link between incentives provided by the new compensation contracts and the change in a firm's long-run operating performance subsequent to the IPO event. By doing so, I provide an additional evidence on the debate over IPO long-run underperformance and the principal-agent agency theory. I examine a set of hypotheses that deals with the relations among three main variables, compensation structure, firm operating performance, and corporate governance variables around the IPO event. Specifically, I investigate the role of the board of directors in providing an effective internal control tool to discipline entrenched management and thereby reduce the agency cost. Moreover, I provide additional evidence on the role of the ownership structure of CEOs in aligning the interests of shareholders and managers. Finally, throughout the analysis, I examine the role of venture capitalists in IPO firms around the time of the issue. In sum, I found that firms with incentive stock option plans before and after the IPO event have the highest levels of industry adjusted operating performance. However, I was not able to provide evidence on the hypothesis that predicts higher operating performance for CEOs with higher levels of pay-performance sensitivities. Another major finding of this dissertation is the strong support for the alignment of interest hypothesis in both periods around the IPO event (Jensen and Meckling, 1976). Incentives provided by the stock option grants were significantly lower for CEOs with high equity ownership in both periods around the IPO event. In addition, the board of directors have weak internal control after the IPO event. That is, I found no relation between the board domination variable and the industry adjusted operating performance in both periods around the IPO event. Finally, all regression models were not able to provide supportive evidence for the hypothesis that predicts higher use of cash-based compensation and lower use of equity-based compensation when the board is dominated by insiders in both periods. However, I found that the cash-based compensation increase when the percentage of inside directors increase from the period before to the period after the IPO event. In sum, the results imply that equity-based compensation and venture capital financing provide value to IPO firms, and the agency cost problem is significantly low before and significantly high after the IPO event (Jensen and Meckling, 1976).

ISBN: 9780493739076Subjects--Topical Terms:

542899
Finance.
Subjects--Index Terms:

Firm performance

Managerial incentives and firm performance: Evidence from initial public offerings.
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500 $a Source: Dissertations Abstracts International, Volume: 64-05, Section: A.
500 $a Publisher info.: Dissertation/Thesis.
500 $a Advisor: Davidson, Wallace N., III.
502 $a Thesis (Ph.D.)--Southern Illinois University at Carbondale, 2001.
520 $a An initial public offering (IPO) generally represents the largest equity issue in a firm's life and the beginning of the transformation process for firms from private to public ownership, which will enforce a major change in the principal-agent relationship. While there have been studies focusing on the principal-agent relationship, the role of executive compensation subsequent to IPOs has not been explored extensively in the literature. In this dissertation, I examine the link between incentives provided by the new compensation contracts and the change in a firm's long-run operating performance subsequent to the IPO event. By doing so, I provide an additional evidence on the debate over IPO long-run underperformance and the principal-agent agency theory. I examine a set of hypotheses that deals with the relations among three main variables, compensation structure, firm operating performance, and corporate governance variables around the IPO event. Specifically, I investigate the role of the board of directors in providing an effective internal control tool to discipline entrenched management and thereby reduce the agency cost. Moreover, I provide additional evidence on the role of the ownership structure of CEOs in aligning the interests of shareholders and managers. Finally, throughout the analysis, I examine the role of venture capitalists in IPO firms around the time of the issue. In sum, I found that firms with incentive stock option plans before and after the IPO event have the highest levels of industry adjusted operating performance. However, I was not able to provide evidence on the hypothesis that predicts higher operating performance for CEOs with higher levels of pay-performance sensitivities. Another major finding of this dissertation is the strong support for the alignment of interest hypothesis in both periods around the IPO event (Jensen and Meckling, 1976). Incentives provided by the stock option grants were significantly lower for CEOs with high equity ownership in both periods around the IPO event. In addition, the board of directors have weak internal control after the IPO event. That is, I found no relation between the board domination variable and the industry adjusted operating performance in both periods around the IPO event. Finally, all regression models were not able to provide supportive evidence for the hypothesis that predicts higher use of cash-based compensation and lower use of equity-based compensation when the board is dominated by insiders in both periods. However, I found that the cash-based compensation increase when the percentage of inside directors increase from the period before to the period after the IPO event. In sum, the results imply that equity-based compensation and venture capital financing provide value to IPO firms, and the agency cost problem is significantly low before and significantly high after the IPO event (Jensen and Meckling, 1976).
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650 4 $a Variables. $3 3548259
650 4 $a Copyright. $3 601694
650 4 $a Noise. $3 598816
650 4 $a Literature reviews. $3 3559998
650 4 $a Asymmetry. $3 3562922
650 4 $a Cross-sectional studies. $3 3770672
653 $a Firm performance
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