Incentive Contracts and Managerial Behavior
Date Issued
2005
Date
2005
Author(s)
Hu, Hsiao-Wen
DOI
zh-TW
Abstract
Title: Incentive Contracts and Managerial Behavior
Name: Hsiao-Wen Hu
Advisor: Rong-Ruey Duh, Ph.D.
Month/Year: June, 2005
This thesis explores the association between incentive contracts and managerial behavior. Financial measures have been suggested to be likely to induce managers to act inconsistent with the interest of shareholders.
Thus, incorporating non-financial measures in incentive contracts may mitigate such behavior. Since the learning and growth aspect of non-financial measures are leading indicators of firm performance and will have long-term rather than short-term impact, incorporating this
particular measure in the contract may further mitigate manager’s dysfunctional behavior.
Two kinds of managerial behavior are examined in this thesis: insider trading and earnings management. Data on the weighting of various performance measures in the CEO incentive contracts are obtained via a questionnaire survey with CEOs of publicly traded companies in Taiwan. The 111 useable responses along with the data for measuring earnings management and insider trading obtained from TEJ Database and Market Observation Post System (MOPS) are analyzed to test the relationship between weighting of non-financial measures and CEO’s insider trading. A similar test is conducted to examine the
association between weighting of non-financial measures and earnings management. Further, the association between weighting of learning and growth measures and insider trading (and earnings management) is tested.
After controlling for some variables, multiple regression analysis indicates that the coefficients are in the expected sign but all are not significant. Possible explanations and limitations are offered.
Subjects
誘因式獎酬契
約
財務指標
非財務指標
學習成長
內部人交易
盈餘管理
Incentive contract
Financial measures
Non-financial measures
Learning and growth
Insider trading
Earnings management
Type
other
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