Agrawal, A. Google Scholar.
Executive Compensation as an Agency Problem
Bizjak, M. Brickley and L. Article Google Scholar. Black, F. Brickley, J. Bhagat and R. Cho, M. Core, J. Dechow, P. Defusco, R. Johnson and T. Demsetz, H. Downs, D. Hall, J. Hanlon, M. Haugen, A. Himmelberg, C. Hubbard, and D. Hite, G. Hermalin, B. Holderness, C. Kroszner and D. Ittner, C. Lambert and D. Jensen, M. Lewellen, W. Loderer and A. Loderer and K. Ljung, M. Mandelker, G. McConnell, J. Morck, R. Shleifer and R. Murphy, K.
Palia, D. Has PDF. Publication Type. More Filters. Research Feed. Stock price reaction and value relevance of recognition versus disclosure: the case of stock-based compensation. Economic consequences of accounting for stock-based compensation.
The Trouble with Stock Options | NBER
Market valuation of employee stock options. Highly Influential. View 4 excerpts, references results and background.
For the last time: stock options are an expense. The results contribute to the understanding of the field, which in most of the sociopolitical literature focuses on the behavior of the agents CEO, senior management team, board members , rather than principles and interests, e. The next section addresses the theory of behavioral agency. The following sections describe the methodological aspects, results, discussions, and conclusions of the study. This work adopted a descriptive research approach through bibliometric analysis that provided an overview of the intellectual structure of the publications on behavioral agency theory.
The analysis of the articles led to identifying significant structures and patterns in elements such as authorship, journals, research questions, theories, and geographic sample and findings. The assumption is that, when facing a trade-off decision, the economic agents will decide, with unlimited rationality, for the decision that maximizes utility. These are the same assumptions accepted within economic and financial literature and are central pillars for widely known and accepted hypotheses, such as the efficient market hypothesis EMH.
The idea of the asymmetries of interest and information between agent and principal, and sometimes between two or more principals, presents significant challenges for companies. Against this backdrop, Corporate Governance has been used to mitigate agency problems. However, as the agency theory was initially used to understand economic agents as rational decision-makers, corporate governance mechanisms took the same route.
However, agents are not rational one hundred percent of the time, and this variance could be influenced more by their behavior than initially thought.
While economic literature and even business and management literature started dealing with behavior and bounded rationality between and , agency theory was formally developed in , with Jensen and Mackling At that time, little attention was given to the implications of behavior. However, it is essential to note that we are not assuming that all decisions are behavioral.
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This article is about the need for the academia to better understand how behavior influences the existence and intensity of asymmetries, and, even more important, how we could adapt the existing mechanisms of corporate governance to take into account behavioral problems derived from asymmetries. With this in mind, bibliometric research offers a holistic approach to behavioral agency theory in order to highlight trends and gaps. The first paper published on the subject was by Blair and Placone , who sought to identify the existence of traditional behavior of preferential expenditure by mutual associations as opposed to associations in the savings and loan industry.
They found evidence that the mutual form of organization is inherently prone to preferential spending behavior.
- Corporate Governance, Ethics, and the Backdating of Stock Options – Étnor.
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- Corporate Governance, Agency Problems, and Executive Compensation;
The results also confirmed that increasing concentration in a market does not generally encourage preference behavior over expenditure. The most recent article is by Evert, Sears, Martin et al. The research looks at how family ownership and family involvement affect the probability of initial entry of firms into the international market.
It is found that family ownership and involvement reduce the likelihood of initial international entry, and act as interactive substitutes in this movement. Between and , many studies were conducted about behavioral agency theory. Since then, the field seems to be heading to aspects such as top team remuneration and correlated aspects. Also, family businesses appear as a promising subsample due to a higher presence of behavioral aspects in comparison to non-family firms. However, this compensation practice may have unintended consequences.
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Sanders has shown that ownership of stocks leads to conservative decisions, as executives try to protect their assets from financial risk. Traditionally, compensation risk has been captured through measures categorizing different types of payment into fixed and variable forms, based on broad definitions of each type of remuneration. The actual payment risk is the threat of loss, not just uncertainty. CEOs who realize that their contract will be terminated are more likely to engage in higher risks than those CEOs who perceive a lower chance of termination.
In sum, the marginal influence of employment risk on risk behavior increases with increasing employment risk. While the agency theory focuses on the implications for the firm of costs arising from the principal-agent relationship, using efficiency as the primary evaluation criterion, the behavioral agency theory focuses on the relationship between agency costs and performance, using efficiency and effectiveness.
The agency theory assumes that agents are rational, risk-averse, and income-seeking and that there is no non-pecuniary agent motivation. The behavioral agency theory proposes a more sophisticated model in which agents are rational regarding loss, risk, and uncertainty.
Moreover, agency theory assumes a linear relationship between remuneration and motivation, whereas behavioral agency theory proposes a more sophisticated function that is affected by loss aversion, risk, and uncertainty PEPPER and GORE, Unlike the logic of agency theory, high-powered incentives are not an efficient and effective way of motivating agents.
It is not possible to build an incentive contract for an agent or define performance measures that incorporate all the current objectives of the principal and are flexible enough to deal with all possible exogenous shocks that may occur during the performance cycle PEPPER and GORE, While CEOs may prioritize compensation and wish to act differently from the interest of the board of directors, payment of long-term stock options and incentives is only granted to achieve the long-term goals set by the board.
Not every share-based payment is the same, nor are its effects consistent over time. Various stock-based compensation elements have distinct incentives, which change as the values of these stocks grow, and their characteristics of acquisition change. CEOs take significant risks early in the life of their stock options when current wealth is low and prospective wealth estimates are likely to be high. The quantitative bibliographic study has received different terms in the literature. This study uses the term precisely because of the provision of behavioral agency theory, studied in social sciences.
This study analyzes national and international scientific production on the subject of agency behavior. The following two research terms were studied: "Behavioral agency" and "Behavior agency. This research included two databases related to literature and social science: "Scopus" and "Web of Science.
In summary, Box 1 presents the general characteristics of the bibliometric research and thus allows other researchers to replicate the study. When entering the query for the search terms, a total of articles were retrieved.
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Using Excel software, records were organized and selected according to the following filters: duplicate records, journal articles, search words in abstracts, title, keywords or references, and relevance to the subject of the study. Through these procedures, relevant articles were selected. Box 1 Characteristics of the bibliometric research. This research began by describing the characteristics of the data set of articles.
There has been a clear upward trend in the number of publications in behavioral agency around , which was followed by a second outbreak in Figure 1 shows the historical evolution of the records of publications on the behavioral agency. The years not presented in the figure did not record publications. Source: Elaborated by the authors.
Figure 1 Number of publications per year.
Box 2 shows articles categorized by featured journals that presented two or more articles on Behavioral Agency. There are six journals classified according to the criteria described. The table includes only journals that published two or more articles on the theme. Box 2 Journals that published more articles on behavioral agency.
The second was Wiseman, with 07 articles. Box 3 Top 10 most published authors researching behavioral agency. The second was the theory of family firm; the third was the behavioral agency model, followed by the socio-emotional wealth. The table includes only theories found in two or more articles. Box 4 The most cited theories in research on behavioral agency. Regarding the classification of the studies Table 1 , the majority of them adopted an empirical approach Table 1 Classification of the studies.
The methodology used in the articles analyzed was observed Table 2 and classified as quantitative; theoretical essay; literature review; case study; quali-quantitative; experiment. Table 2 Methodology used in articles. When analyzing the geographic origin of the 86 In addition, three articles used a global sample, involving all countries. The classification shows how many times the countries were mentioned in the articles, highlighting the high number of articles referring to the US Other countries mentioned many times were Spain 12 , and Germany 7 and Italy 7.