Summary and Conclusion - Asset Write Downs and Executive Compensation

This study examines whether the board of directors shields executive compensation from asset write-downs, and whether the shielding effect varies with managerial power. Additionally, this paper investigates the association of compensation shielding with subsequent firm performance conditioned on managerial power and the quality of asset write-down, respectively. Our findings indicate that the existence of shielding executive compensation from asset write-downs and the shielding behavior of asset write-downs increases with managerial power. The result implies that the compensation shielding is attributed to managerial power to some degree, not optimal contract completely. Finally, we find a significantly negative

relationship between the shielding and subsequent market performance. Our evidence shows that the shielding driven by managerial power is favorable to executives and causes harm to firm performance, manifesting a suboptimal contract for shareholders.

This study provides important implications. Based on our findings, we complement prior literature on executive compensation and asset write-downs.

Different from existing studies based mainly on the external market perspective, this study based on the internal management perspective adds to the related literature by stressing the role of a write down in contracting and performance evaluation. The result supplements prior studies on the compensation shielding behavior, which are US based and largely rooted in optimal contracting theory.

Furthermore, given the more emphases that IFRSs put on managerial professional judgments, the difficulty in identifying fair value of long-lived assets, write-down decisions contain much managerial discretion and thus raise different aspects of agency problems. Our study additionally addresses the “compensating agency problem” related to reducing the compensation weight on asset write-downs.

These results may be of relevance for policy-makers that CEOs use their power to manipulate incentive contracts and obtain excess pay, leading to lower pay-performance sensitivity. Thus, our paper adds to the research on managerial power.

Reference

Abdel-Khalik, R. 1985. The effect of LIFO-switching and firm ownership on executives’ pay. Journal of Accounting Research 23: 427-447.

Abdel-Khalik, R., C. Chi, and D. Ghicas. 1987. Rationality of incentive compensation schemes and real accounting changes. Contemporary Accounting Research 4 (Fall): 32-61.

Adut, D., W. Cready, and T. Lopez. 2003. Restructuring Charges and CEO Compensation: A Reexamination. The Accounting Review 78: 169-192.

Aggarwal, R. K., and A. A. Samwick. 2006. Empire-builders and shrikers: Investment, firm performance, and managerial incentives. Journal of Corporate Finance 12 (June): 489-515.

Ahemd, K., M. Hossain, and M. B. Adams. 2006. The effects of board composition and board size on the informativeness of annual accounting earnings. Corporate Governance: An International Review 14 (September): 418-431.

Ahmed, A., and S. Duellman. 2007. Accounting conservatism and board of director characteristics: An empirical analysis. Journal of Accounting & Economics 43 (July): 411-437.

Alciatore, M., P. Easton, and N. Spear. 2000. Accounting for the impairment of long-lived assets: Evidence from the petroleum industry. Journal of Accounting and Economics 29: 151-172.

Attaway, M. 2000. A study of the relationship between company performance and CEO compensation. American Business Review 18 (January): 77–85.

Baber, W. R., S. Kang, and K. Kumar. 1998. Accounting earnings and executive

compensation: The role of earnings persistence. Journal of Accounting and Economics 25 (May): 169-193.

Baber, W., S. Janakiraman, and S. Kang. 1996. Investment opportunities and the structure of executive compensation. Journal of Accounting and Economics 21 (June): 297–318.

Baker, G., M. Jensen, and K. Murphy. 1988. Compensation and incentives: practice vs.

theory. Journal of Finance 43: 593-616.

Ball, R. 2006. International financial reporting standards (IFRS): pros and cons for investors. Accounting and Business Research, International Accounting Policy Forum, 5-27.

Balsam, S., A. L. Reitenga, and J. M. Sanchez. 2009. Corporate restructuring quality and CEO compensation. Working paper, Temple University.

Banker, R., and S. Datar. 1989. Sensitivity, precision, and linear aggregation of signals for performance evaluation. Journal of Accounting Research 27 (Spring):

21-39.

Bartov, E., F. W. Lindahl, and W. E. Ricks. 1998. Stock price behavior around announcements of write-offs. Review of Accounting Studies 3(4): 327-346.

Bebchuck, L. A., J. M. Fried, and D. I. Walker. 2002. Managerial power and rent extraction in the design of executive compensation. The University of Chicago Law Review 69 (September): 751-846.

Bebchuk, L. A. & Fried, J. M. 2003. Executive compensation as an agency problem.

Journal of Economics Perspectives 17: 71-92.

Bebchuk, L. A., M. Cremers, and U. Peyer. 2007. CEO centrality. Working paper,

Harvard University, Yale School of Management, and INSEAD.

Bebchuk, L. A., M. Cremers, and U. Peyer. 2008. “CEO centrality.” Harvard Law School Olin Discussion Paper 601.

Berger, P., E. Ofek, and D. Yermack. 1997. Managerial entrenchment and capital structure decisions. Journal of Finance 52 (September): 1411-1438.

Bertrand, M. and S. Mullainathan. 2001. Are CEOs rewarded for luck? The ones without principals are. Quarterly Journal of Economics116: 901 - 932.

Blanchard, O. J., F. Lopez-de-Silanes, and A. Shleifer. 1994. What do firms do with cash windfalls. Journal of Financial Economics 36: 337 - 360.

Brickley, J. A., and L. D. Van Drunen. 1990. Internal corporate restructurings: An empirical analysis. Journal of Accounting and Economics 12 (January): 251-280.

Bunsis, H. 1997. A description and market analysis of write-off announcements.

Journal of Business Finance & Accounting 42 (9) & (10): 1385-1400.

Chaney, P. K., C. E. Hogan, and D. C. Jeter. 1999. The effect of reporting restructuring charges on analysts’ forecast revisions and errors. Journal of Accounting and Economics 27 (July): 261-284.

Chao, C. 2007. An examination of SFAS No. 35: Adoption timing motives, write-off characteristics, and market reaction. The International Journal of Accounting Studies (special issue): 77-120.

Chen, C. J. P., S. Chen, X. Su, and Y. Wang. 2004. Incentives for and consequences of initial voluntary asset write-downs in the emerging Chinese market. Journal of International Accounting Research 3 (January): 43-61.

Chen, J. J., X. Liu, and W. Li. 2010. The effect of insider control and global

benchmarks on Chinese executive compensation. Corporate Governance: An International Review 18(2): 107-123.

Cheng S. 2003. Shielding executive annual pay from losses: empirical evidence of managerial entrenchment. Working paper, University of Michigan Business School.

Choe C., G. Tian, and X. Yin. 2009. Managerial power, stock-based compensation, and firm Performance theory and evidence. Working paper, Monash University.

Claessens, S., S. Djankov, and L. H. P. Lang. 2000. The separation of ownership and control in East Asian corporation. Journal of Financial Economics 58(1):

81-112.

Collins D., G. Gong, and H. Li. 2009. Corporate governance and backdating of executive stock options. Contemporary Accounting Research 26(2): 403-445.

Comprix, J., and K. A. Muller III. 2006. Asymmetric treatment of reported pension expense and income amounts in CEO cash compensation calculations. Journal of Accounting Economics 42 (August): 385-416.

Core, J. E., R. Holthausen, and D. Larcker. 1999. Corporate governance, chief executive officer compensation, and firm performance. Journal of Financial Economics 51: 371-406.

Cyert, R. M., S. H. Kang, and P. Kumar. 2002. Corporate governance, takeovers, and top management compensation: Theory and evidence. Management Science 48 (4): 453–469.

Daniel A. Bens, D. A., W. Heltzer, and B. Segal. 2011. The information content of Goodwill impairments and SFAS 142. Journal of Accounting, Auditing &

Finance 26: 527-555.

Davila A., and F. Penalva. 2006. Governance structure and the weighting of performance measures in CEO compensation. Review of Accounting Studies 11 (December): 463-493.

Davila A., and M. Venkatachalam. 2004. The relevance of non-financial performance measures for CEO compensation: Evidence from the airline industry. Review of Accounting Studies 9 (4): 443-464.

Dechow, P. M., M. Linda and C. Shakespeare. 2010. Fair value accounting and gains from asset securitizations: a convenient earnings management tool with compensation side-benefits. Journal of Accounting Economics 49: 2–25.

Dechow, P. M., M. R. Huson, and R. G. Sloan. 1994. The effect of restructuring charges on executives’ cash compensation. The Accounting Review 69 (January):

138-156.

Demsetz, H., and K. Lehn. 1985. The structure of corporate ownership: causes and consequences. Journal of Political Economy 93(6): 1155-1177.

Deng, Z. and B. Lev. 1998. Flash-then-flush: the valuation of accquired R&D in process. Working paper. New York University.

Dorata, N.T. 2008. The shielding of CEO cash compensation from post-acquisition earnings’ charges. Managerial Finance 34 (5): 288-303.

Duh, R. R., W. C. Lee, and C. C. Lin. 2009. Reversing an impairment loss and earnings management: The role of corporate governance. The International Journal of Accounting 44(2): 113-137.

Duru, A., R. J. Iyengar, and A. Thevaranjan. 2002. The shielding of CEO

compensation from the effects of strategic expenditures. Contemporary Accounting Research 19 (Summer): 175-193.

Eisenberg, T., S. Sundren, and M. Wells. 1998, Larger board size and decreasing firm value in small firms. Journal of Financial Economic 48 (April): 35-54.

Elliott J. A., and W. H. Shaw. 1988. Write-offs as accounting procedures to manage perception. Journal of Accounting Research 26: 91-119.

Fama, E. F., and M. C. Jensen. 1983. The separation of ownership and control.

Journal of Law and Economics 26 (June): 301-325.

Ferris, S. P., K. A. Kim, P. Kitsabunnarat, and T. Nishikawa. 2007. Managerial power in the Design of executive compensation: Evidence from Japan. Corporate Governance and Finance 12: 3-26.

Finkelstein, S. and D. C. Hambrick. 1989. Chief executive compensation: A study of the intersection of markets and political processes. Strategic Management Journal 10 (March-April): 121-134.

Francis, J., D. Hanna, and L. Vincent 1996. Causes and effects of discretionary asset writeoffs. Journal of Accounting Research 34 (Supplement): 117-134.

Fu, C. J., S. J. You, and M. Koo. 2002. The impacts of managerial ownership on CEO compensation design. AAA 2002 Annual Meeting.

Gaver J., and K. Gaver. 1998. The relation between nonrecurring accounting transactions and CEO cash compensation. The Accounting Review 73 (April):

235-253.

Geiger, S. W., and L. H. Cashen. 2007. Organizational size and CEO Compensation:

the moderating effect of diversification in downscoping organizations. Journal

of Managerial Issues 19: 233-255.

Gibbons, R., and K. J. Murphy. 1992. Optimal incentive contracts in the presence of career concerns: Theory and evidence. Journal of Political Economy 100:

468-505.

Gomez-Mejia, L. R. 1994. Executive compensation: a reassessment and a future research agenda. In Research in Personnel and Human Resources Management, edited by G. R. Ferris, Vol. 12: 161-222. Greenwich, CT: JAI Press.

Goyal, V. K. & Park, C. W. 2002. Board leadership structure and CEO turnover.

Journal of Corporate Finance 8: 49-66.

Grinstein Y., and P. Hribar. 2004. CEO compensation and incentives: Evidence from M&A bonuses. Journal of Financial Economics 71 (July): 119-143.

Hallock, K. F. 1997. Reciprocally interlocking boards of directors and executive compensation. Journal of Financial and Quantitative Analysis, 32, 331-344.

Hanlon, M., S. Rajgopal, and T. Shevlin. 2003. Are executive stock options associated with future earnings? Journal of Accounting and Economics 36 (December):

3-43.

Harjoto, M., and D. Mullineaux. 2003. The impact of the transformation of banking on CEO compensation. Journal of Financial Research 26 (3): 341-354.

Hartzell, J., and L. Starks, 2003, Institutional Investors and Executive Compensation, Journal of Finance 58, 2351-2374.

Heflin, F., and T. Warfield. 1997. Managerial discretion in accounting for asset write-offs. Working paper, University of Wisconsin-Madison.

Henderson, B. C., A. Masli, V. J. Richardson, and J. M. Sanchez. 2010. Layoffs and

Chief Executive Officer (CEO) compensation: does CEO power influence the relationship? Journal of Accounting, Auditing and Finance 25(4): 709-748.

Himmelberg, C., R. Hubbard, and D. Palia. 1999. Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Economics 53 (September): 353-384.

Holmström, B., 1979. Moral Hazard and Observability. Bell Journal of Economics 10:

74-91.

Hsieh, W. T., and T. Z. Wu. 2005. Determinants and market reaction of assets impairment in Taiwan. Taiwan Accounting Review 6 (1): 59-95.

Jaggi, B., Lin, B., Govindaraj, S., Lee, P. 2009. The Value Relevance of Corporate Restructuring Charges. Review of Quantitative Finance and Accounting 32(2):

101-128.

Jensen, M. C., & Murphy, K. J. 1990. Performance pay and top-management incentives. Journal of Political Economy 98: 225-264.

Johnston, J. 2002. Tenure, promotion and executive remuneration. Applied Economics 34(8): 993-997.

Kalyta, P. 2009. Compensation transparency and managerial opportunism: A study of supplemental retirement plans. Strategic Management Journal 30 (4): 405-424.

Kalyta, P. and M. Magnan, 2008. Executive pensions, disclosure Quality, and Rent Extraction. Journal of Accounting and Public Policy 27: 133-166.

Khurana, I. K., and M. Kim. 2003. Relative value relevance of historical cost vs. fair value: Evidence from bank holding companies. Journal of Accounting and Public Policy 22: 19-42.

Klein, A. 2002. Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics 35: 375-400.

Klein, A., 1998, Firm Performance and Board Committee Structure, Journal of Law and Economics 41: 137-165.

Lambert R. A., and D. F. Larcker. 1987. An analysis of the use of accounting and market measure of performance in executive compensation contracts. Journal of Accounting Research 25 (Supplement): 85-125.

Lambert R. A., D. F. Larcker, and K. Weigelt. 1991. How sensitive is executive compensation to organizational size? Strategy Management Journal 12 (5):

395-402.

Leone, A., Wu, J., Zimmerman, J., 2006. Asymmetric sensitivity of CEO cash compensation to stock returns. Journal Accounting Economics 42, 167–192.

Lin, S.H., and S.Y. Hu. 2003. CEO compensation structure in Taiwan’s listed companies. Academia Economic Papers 31(2), 171-206.

Liu, Y. and P. Jiraporn. 2010. The effect of CEO power on bond ratings and yields.

Journal of Empirical Finance 17: 744–762.

Loh, A., and T. TAN. 2002. Asset write-offs: managerial incentives and macroeconomic factors. Abacus 38 (1): 134-151.

Mak, Y. T., and Y. Kusnadi. 2005. Size really matters: Further evidence on the negative relationship between board size and firm value. Pacific-Basin Finance Journal 13 (June): 301-318.

Masli, A., V. J. Richardson, J. M. Sanchez, and R. E. Smith. 2008. Information technology investments, CEO compensation and market valuation. Working

paper, University of Arkansas.

Murphy, K. J. 1999. Executive compensation. In: Ashenfelter, O., Card, D. (Eds.), Handbook of Labor Economics, Vol.1: 2485-2563, North-Holland, Amsterdam.

Natarajan, R. 1996. Stewardship value of earnings components: Additional evidence on the determinants of executive compensation. The Accounting Review 71:

1-22.

Ozerturk, S. 2005. Board independence and CEO pay. Economics Letters 88 (August):

260-265.

Ozkan, N. 2011. CEO compensation and firm performance: an empirical investigation of UK panel data. European Financial Management 17 (2): 260-285.

Palia, D. 2001. The endogeneity of managerial compensation in firm valuation: A solution. Review of Financial Studies 14 (3): 735-764.

Pathan, S., 2009. Strong boards, CEO power and bank risk-taking. Journal of Banking and Finance 33: 1340–1350.

Rees, L., S. Gill, and R. Gore. 1996. An investigation of asset write-downs and concurrent abnormal accruals. Journal of Accounting Research 34 (Supplement):

157-169.

Riedl, J. E. 2004. An examination of long-lived asset impairments. The Accounting Review 79 (3): 823-852.

Rosen, S. 1992. Contracts and the market for executive", in Lars, W., Hans, W. (Eds), Contract Economics, Blackwell, Oxford, in.

Shleifer, A., Vishny, R., 1997. A survey of corporate governance. Journal of Finance 52, 737–783.

Sloan, R. G. 1993. Accounting earnings and top executive compensation. Journal of Accounting and Economics 16 (April): 55-100.

Smith, C., and R. Watts, 1992. The investment opportunity set and corporate financing, dividend and compensation policies. Journal of Financial Economics 32 (December): 263-292.

Solomon, J. F., S. W. Lin, S. D. Norton, and A. Solomon. 2003. Corporate governance in Taiwan: Empirical evidence from Taiwan company directors. Corporate Governance: An International Review 11 (3): 235-248.

Strong, J. and J. Meyer. 1987. Asset writedowns: Managerial incentives and security returns. Journal of Finance 42 (July): 643-663.

Tosi, H. L., S. Werner, J. Katz, and L. Gomez-Mejia. 2000. A meta-analysis of executive compensation studies. Journal of Management 26: 301-339.

Tsai, W. H., Y. C. Kuo, and J. H. Hung. 2009. Corporate diversification and CEO turnover in family businesses: self-entrenchment or risk reduction? Small Business Economics 32 (1): 57-76.

Vafeas, N. 2000. Operating performance around the adoption of director incentive plans. Economics Letters 68(2): 185-190.

Weir, C., D. Laing and P. McKnigh. 2002. Internal and external governance mechanisms: their impact on the performance of large UK public companies.

Journal of Business Finance & Accounting 29: 579–611.

White, H. 1980. A heteroscedasticity-consistent covariance matrix estimator and a direct test for heteroscedasticity. Econometrica, 48: 817-838.

Wolcott, S. 1993. The effects of prior shareholder anticipation and restructuring

actions on the stock price response to writedown announcements. Ph. D. thesis, Northwestern University.

Yeh, Y. H., & Woidtke, T. 2005. Commitment or entrenchment? Controlling shareholders and board composition. Journal of Banking and Finance, 29(7):

1857-1885.

Yermack, D., 1996. Higher market valuation for firms with a small board of directors.

Journal of Financial Economics 40, 185-211.

Yermack. 1997. Good timing: CEO stock option awards and company news announcements. Journal of Finance 52 (June): 449-476.

Zhang, W., and S. F. Cahan. 2010. Nonrecurring accounting transactions and stock option grants. Journal of Business Finance and Accounting 37 (1-2): 93-129.

Zucca, L. J., and D. R. Campbell. 1992, A closer look at discretionary write-downs of impaired Assets. Accounting Horizons 6 (September): 30-41.

Table 1 Selection of the Sample

Number of firms Firms that reported asset write-downs in 2004 and 2005 , excluding banking and

financial institution 580

Less firms:

if the CEO was not in office for the entire current and previous year (84) with substantial events, such as merging, declaring bankruptcy or

unlisted (6)

with insufficient compensation data (56) with insufficient CEO tenure data (20)

with insufficient financial and market value data (112) (278) Number of firms in final sample 302

Table 2 Descriptive Statistics

Variable Mean Standard Deviation Lower quartile Median Upper quartile CEO Compensation

COMP (thousands) 4003.454 5212.158 2035.000 2954.500 4544.500

ln(COMP) 7.998 0.734 7.618 7.991 8.422 Firm Performance CEO FAM (Dummy) 0.315 0.465 0.000 0.000 1.000 DUALITY (Dummy) 0.311 0.464 0.000 0.000 1.000 HI POWER (Dummy) 0.5 0.501 0.000 0.5 1.000 Control Variables

BOARD_SIZE 6.834 2.382 5.000 7.000 8.000 IND_BOARD 0.315 0.465 0.000 0.000 1.000 BOD_HOLD (%) 18.968 10.566 10.678 16.220 24.865

RET 0.112 0.173 0.017 0.076 0.154

RISK 18.445 7.354 13.422 17.393 22.039

TENU (Year) 9.136 8.504 3.000 6.000 11.000 LN(TENU) 1.853 0.835 1.099 1.792 2.398 MB 1.282 0.877 0.747 0.995 1.597

SIZE 15.255 1.408 14.272 15.111 15.965

YEAR (Dummy) 0.238 0.427 0.000 0.000 0.000 Note: 1. n=302. 2. Variable Definitions: COMP is CEO base salary plus cash reward, special allowances and bonus

in year t; ln(COMP) is the natural logarithm of adjusted CEO compensation; POS_INC is the positive value of income before asset write-off for period t (scaled by total assets at the beginning of the year t), zero otherwise;

NEG_INC is the negative value of income before asset write-off for period t (scaled by total assets at the beginning of the year t), zero otherwise; WOTA is firm i's reported asset write-downs (reflected as a negative

amount) for period t, divided by total assets at the end of t-l; POWER is constructed using three components:

CEO_HOLD, CEO_FAM and DUALITY; CEO_HOLD is the percentage of outstanding shares owned by the CEO;

CEO_FAM is an indicator variable equal to one if CEO is family member in year t, and zero otherwise; DUALITY is an indicator variable equal to one if the CEO is also the chairman of the board in year t, and zero otherwise;

HI_POWER is a dichotomous variable coded 1 if the CEO Power Index score is higher than the median value, and zero otherwise; BOARD_SIZE is the total number of directors on the board in year t; IND_BOARD is an indicator variable equal to one if the firm has an independent board member in year t, and zero otherwise; BOARD_HOLD is the percentage of outstanding shares owned by the directors in year t; RET is the annual stock returns in year t;

RISK is the average standard deviation of common stock monthly returns over the prior three years; TENU is measured as the number of years that the CEO has served the position in the firm; ln(TENU) is the natural log of CEO tenure in year t; MB is the ratio of the current share price to the book value per share in year t; SIZE is the natural log of total assets in year t; YEAR is an indicator variable equal to one if the observation is in year 2004, and zero otherwise.

Table 3 Industry and Year Distribution of Firm Numbers Panel A ： Distribution of asset write-downs by industry

Industry Number of firms Percentage (%)

Cement 4 1.32

Food 7 2.32

Plastic 7 2.32

Textile 19 6.29

Electric Machinery 8 2.65

Electrical and Cable 6 1.99

Chemical 15 4.97

Computer and Peripheral Equipment 17 5.63

Optoelectronic 24 7.95

Communications and Internet 18 5.96 Electronic Parts and Components 36 11.92 Electronic Products Distribution 6 1.99

Information Service 11 3.64

Other Electronic 16 5.3

Building Material and Construction 34 11.26 Shipping and Transportation 3 0.99

Tourism 2 0.66

Trading and Consumers' Goods 7 2.32 Oil, Gas and Electricity 3 0.99

Other 15 4.97

Total 302 100

Panel B ：Distribution of asset write-downs by fiscal year

Year 2004 2005 Total

Number of firms 72 230 302

Percentage (%) 23.8 76.2 100

Table 4 Correlation Analysis

Variable 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

1.Ln(COMP) 1.00 0.39 ^*** 0.36 ^*** 0.26 ^*** 0.15 ^***-0.03 -0.04 -0.03 -0.23 ^*** 0.18 ^*** 0.25 ^*** 0.50 ^*** 0.01 -0.14 ^** -0.09 -0.04 -0.12 ^**

2.POS_INC 0.37 ^*** 1.00 0.83 ^*** 0.32 ^*** 0.05 0.14 ^** 0.25 ^*** -0.04 -0.28 ^*** 0.10 ^* 0.36 ^*** 0.19 ^*** 0.02 0.00 0.02 -0.11 ^* -0.02 3.NEG_INC 0.31 ^*** 0.38 ^*** 1.00 0.31 ^*** 0.03 0.05 0.22 ^*** -0.02 -0.23 ^*** 0.06 0.18 ^*** 0.28 ^*** 0.01 -0.06 0.03 -0.13 ^** -0.07 4.WOTA 0.12 ^** 0.19 ^*** 0.17 ^*** 1.00 0.10 ^* 0.02 0.10 ^* -0.04 -0.21 ^*** 0.11 ^* 0.24 ^*** 0.28 ^*** -0.22 ^*** 0.00 -0.05 -0.04 -0.03 5. BOARD_SIZE 0.15 ^*** 0.08 0.09 0.06 1.00 0.14 ^** 0.16 ^*** -0.16 ^*** -0.33 ^*** 0.02 0.10 ^* 0.26 ^*** 0.04 -0.25 ^*** -0.23 ^*** -0.15 ^***-0.29 ^***

6. IND_BOARD -0.05 0.17 ^*** 0.01 0.03 ^** 0.07 1.00 0.15 ^*** 0.05 -0.23 ^*** -0.01 0.39 ^*** -0.20 ^*** -0.06 0.17 ^*** -0.03 -0.05 0.06 7. BOD_HOLD 0.01 0.20 ^*** 0.14 ^** 0.07 0.13 ^** 0.12 ^** 1.00 -0.04 -0.32 ^*** 0.08 0.08 -0.22 ^*** 0.02 0.08 0.05 -0.10 ^* 0.02 8.RET -0.03 0.01 0.00 -0.03 -0.19 ^*** 0.00 -0.09 1.00 0.14 ^** -0.04 -0.03 -0.02 -0.08 -0.03 -0.06 -0.04 -0.03 9.Risk -0.23 ^*** -0.26 ^*** -0.11 ^* -0.16 ^*** -0.30 ^***-0.22 ^*** -0.29 ^*** 0.10 ^* 1.00 -0.18 ^*** -0.20 ^*** -0.07 -0.01 -0.04 0.03 0.14 ^** 0.05 10.LN(TENU) 0.20 ^*** 0.12 ^** 0.08 0.12 ^** 0.01 -0.02 0.07 -0.08 -0.20 ^*** 1.00 0.09 0.01 -0.05 0.37 ^*** 0.26 ^*** 0.24 ^*** 0.38 ^***

11.MB 0.21 ^*** 0.49 ^*** 0.10 ^* 0.18 ^*** 0.03 0.33 ^*** 0.07 -0.06 -0.17 ^*** 0.09 1.00 0.00 -0.08 0.17 ^*** -0.02 0.06 0.09 12.SIZE 0.50 ^*** 0.18 ^*** 0.30 ^*** 0.16 ^*** 0.37 ^***-0.14 ^** -0.12 ^** -0.08 -0.12 ^** 0.01 0.05 1.00 0.12 ^** -0.42 ^*** -0.12 ^** -0.14 ^** -0.33 ^***

13.YEAR 0.01 0.06 0.02 -0.11 ^* 0.06 ^* -0.06 0.03 -0.12 ^** -0.01 -0.06 -0.02 0.12 ^** 1.00 -0.10 ^* 0.01 -0.06 -0.07 14.CEO_HOLD -0.10 ^* 0.06 -0.05 0.06 -0.24 ^*** 0.15 ^*** 0.10 ^* -0.11 ^* -0.07 0.29 ^*** 0.19 ^*** -0.33 ^*** -0.07 1.00 0.51 ^*** 0.46 ^*** 0.85 ^***

15.CEO_FAM -0.07 0.03 0.11 ^* -0.02 -0.23 ^***-0.03 -0.01 -0.11 ^** 0.02 0.27 ^*** 0.04 -0.12 ^** 0.01 0.52 ^*** 1.00 0.35 ^*** 0.74 ^***

16.DUALITY -0.03 -0.08 -0.09 -0.02 -0.17 ^***-0.05 -0.09 -0.02 0.12 ^** 0.25 ^*** 0.05 -0.17 ^*** -0.06 0.43 ^*** 0.35 ^*** 1.00 0.72 ^***

17.POWER -0.09 -0.01 0.01 -0.01 -0.28 ^*** 0.01 -0.05 -0.08 0.05 0.36 ^*** 0.10 ^* -0.26 ^*** -0.05 0.71 ^*** 0.81 ^*** 0.79 ^*** 1.00

Note: 1. n=302. 2. Spearman correlations are reported above the diagonal. Pearson correlations are reported below the diagonal. 3. See Table 1 for variable definitions. 4. ^***, ^**, and ^* indicate significance at the 1%, 5%, and 10% level, respectively

Table 5 Results from the Relation between Asset Write-downs and CEO Compensation Panel A - Coefficient Estimates

Dependent Variable: ln(COMP)

Independent Variable Predicted BOARD_SIZE ? -0.061 -0.019 0.014 -1.369 1.326 IND_BOARD - -0.074 -0.116 0.076 -1.522 ^* 1.227

Panel B - Summed Coefficients & Coefficient Differences (F-statistics behind coefficient difference estimates)

Model: ⁰ ¹ ² ³ ⁴

COMP POS INC NEG INC WOTA BOARD SIZE IND BOARD BOARD HOLD RET RISK

TENU MB SIZE YEAR

Test for the existence of shielding effect

POS_INC- WOTA, ₁₃ 0.255 (4.58^**)

Note: 1. n=302. 2. see Table 1 for variable definitions. 3. ^***, ^**, and ^* indicate significance at the 1%, 5%, and 10% level, respectively; one-tailed for all coefficients except for those without predicted signs. 4. If the White test statistics reveals the heterogeneity problem, the t-values are calculated based on the heteroskedasticity-consistent covariance matrix following White (1980). 5.VIFs are all smaller than 10.

Table 6 Results for the Effect of Managerial Power on the Relationship between Asset write-downs and CEO Compensation

Panel A - Coefficient Estimates Dependent Variable: ln(COMP)

Independent Variable Predicted sign Standardized coefficient

Estimated coefficient

Standard

Deviation t value VIF INTERCEPT ? 0.000 4.388 0.563 7.788 ^*** 0.000 Adj R²=0.358; Model F(p)= 13.006 (<.0001)

Panel B - Summed Coefficients & Coefficient Differences (F-statistics behind coefficient difference estimates)

Model: ⁰ ¹ ² ³ ⁴

The coefficient of asset write-downs when CEO with high power _

W O T AH I P O W E R W O T A ,_₃__₅ -0.121 (5.26^**) Test for the existence of shielding effect

POS_INC-WOTA, ₁₃ 0.194 (0.72)

POS_INC-(WOTAHI_POWERWOTA),₁(₃₅) 0.078 (8.25^***)

Table 7 Results for the Moderating Effect of Individual CEO Power Measure to the Relation between Asset Write-downs and CEO Compensation Adj R²=0.416; Model F(p)=12.902 (<.0001)

Panel B - Summed Coefficients & Coefficient Differences (F-statistics behind coefficient difference estimates)

Model: ⁰ ¹ ² ³ ⁴ ⁵

COMP POS INC NEG INC WOTA HI CEO HOLD CEO FAM

DUALITY HI CEO HOLD WOTA CEO FAM WOTA DUALITY WOTA

BOARD SIZE IND BOARD BOARD HOLD RET R

     

The coefficient of asset write-downs when CEO with high shareholding

_ _

W O TAH I C EO H O LD W O TA , ₃ ₇ -0.066 (4.40^**) The coefficient of asset write-downs when CEO are also one of family members

W O T AC E O F A M W O T A , ₃ ₈ -0.021 (4.75^**) The coefficient of asset write-downs when CEO are also in the position of chairman

在文檔中 Asset Write Downs and Executive Compensation (頁 39-68)