{"id":{"repo_id":"uiuc","oai_identifier":"oai:www.ideals.illinois.edu:2142/29563"},"canonical_url":"https://search.dev.ndltd.org/etd/uiuc/oai:www.ideals.illinois.edu:2142/29563","repository":{"repo_id":"uiuc","name":"University of Illinois - Urbana-Champaign","base_url":"https://www.ideals.illinois.edu/oai-pmh"},"display":{"title":"Do executives get more pay prior to deteriorations of firm performance?","abstract":"I examine whether executives obtain more direct compensation from their companies in anticipation of deteriorations of firm performance. Using compensation data from S&P 1500 firms, I find that top managers receive more direct compensation in anticipation of the next year’s poor performance. The negative association between compensation and future performance is most significant in firm-years in which insiders sell large amounts of stock, or in which top managers exercise large amounts of options, both of which are signals of top managers’ foreknowledge about future poor performance. Moreover, this phenomenon is more significant in firms with more entrenched CEOs. I also find intensive scrutiny from active shareholders effectively mitigates such behavior. This finding supports the managerial rent-extraction, rather than efficient contracting, explanation for the negative association between current pay and future performance. Consequently, such rent-seeking behavior is followed by even poorer long-term operating and stock performance in the subsequent five years.","abstract_html":"I examine whether executives obtain more direct compensation from their companies in anticipation of deteriorations of firm performance. Using compensation data from S&P 1500 firms, I find that top managers receive more direct compensation in anticipation of the next year’s poor performance. The negative association between compensation and future performance is most significant in firm-years in which insiders sell large amounts of stock, or in which top managers exercise large amounts of options, both of which are signals of top managers’ foreknowledge about future poor performance. Moreover, this phenomenon is more significant in firms with more entrenched CEOs. I also find intensive scrutiny from active shareholders effectively mitigates such behavior. This finding supports the managerial rent-extraction, rather than efficient contracting, explanation for the negative association between current pay and future performance. Consequently, such rent-seeking behavior is followed by even poorer long-term operating and stock performance in the subsequent five years.","abstract_has_math":false,"creators":["Wu, Yu-Ching"],"institution":"University of Illinois at Urbana-Champaign","degree_name":"Ph.D.","degree_level":"Dissertation","degree_discipline":"Accountancy","degree_department":null,"school":null,"contributors":["Chen, Xiaoling","Sougiannis, Theodore","Almeida, Heitor","Li, Yue","Farrell, Anne M."],"advisors":[],"committee_chairs":[],"committee_members":[],"year":2012,"date_issued":"2012-02-01T00:55:35Z","date_published":"2012-02-01T00:55:35Z","updated_at":"2026-07-22T22:25:27Z","subjects":["executive compensation","private information","rent extraction","managerial power theory"],"languages":["en"],"rights":["Copyright 2011 Yu-Ching Wu"],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"http://hdl.handle.net/2142/29563","outbound_label":"Handle","outbound_source":"dc:identifier"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor","label":"Contributor","values":["Chen, Xiaoling","Sougiannis, Theodore","Almeida, Heitor","Li, Yue","Farrell, Anne M."]},{"key":"dc:creator","label":"Author","values":["Wu, Yu-Ching"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date","label":"Dc Date","values":["2012-02-01T00:55:35Z","2014-02-01T11:00:34Z","2011-12"]},{"key":"thesis:degree_discipline","label":"Discipline","values":["Accountancy"]},{"key":"thesis:degree_level","label":"Degree Level","values":["Dissertation"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Ph.D."]},{"key":"thesis:institution_name","label":"Thesis Institution Name","values":["University of Illinois at Urbana-Champaign"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["executive compensation","private information","rent extraction","managerial power theory"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:language","label":"Dc Language","values":["en"]},{"key":"dc:rights","label":"Dc Rights","values":["Copyright 2011 Yu-Ching Wu"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier","label":"Identifier","values":["http://hdl.handle.net/2142/29563"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description","label":"Description","values":["I examine whether executives obtain more direct compensation from their companies in anticipation of deteriorations of firm performance. Using compensation data from S&P 1500 firms, I find that top managers receive more direct compensation in anticipation of the next year’s poor performance. The negative association between compensation and future performance is most significant in firm-years in which insiders sell large amounts of stock, or in which top managers exercise large amounts of options, both of which are signals of top managers’ foreknowledge about future poor performance. Moreover, this phenomenon is more significant in firms with more entrenched CEOs. I also find intensive scrutiny from active shareholders effectively mitigates such behavior. This finding supports the managerial rent-extraction, rather than efficient contracting, explanation for the negative association between current pay and future performance. Consequently, such rent-seeking behavior is followed by even poorer long-term operating and stock performance in the subsequent five years.","Item withdrawn by Mark Zulauf (zulauf@illinois.edu) on 2011-08-24T20:10:44Z Item was in collections: University of Illinois Theses & Dissertations (ID: 1) No. of bitstreams: 2 Wu_Yuching.docx: 141334 bytes, checksum: 5be44c2dfd9a065dde4f423dd9ec225a (MD5) Wu_Yuching.pdf: 242383 bytes, checksum: 4f49991b32741b57ffb59d4ad8266f3f (MD5)","Made available in DSpace on 2012-02-01T00:55:35Z (GMT). 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Using compensation data from S&P 1500 firms, I find that top managers receive more direct compensation in anticipation of the next year’s poor performance. The negative association between compensation and future performance is most significant in firm-years in which insiders sell large amounts of stock, or in which top managers exercise large amounts of options, both of which are signals of top managers’ foreknowledge about future poor performance. Moreover, this phenomenon is more significant in firms with more entrenched CEOs. I also find intensive scrutiny from active shareholders effectively mitigates such behavior. This finding supports the managerial rent-extraction, rather than efficient contracting, explanation for the negative association between current pay and future performance. 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