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AbstractI examine the effect of employee equity‐based compensation (EBC) on firm performance and the determinants of EBC. Using two samples, I find that firms have come to rely more heavily on EBC than in the past. For both samples, I document a significant, positive relation between Tobin's q and the percentage of employee compensation that is equity based. For accounting returns, I find a positive relation with the earlier sample. However, for the later sample I find that greater use of EBC leads to lower levels of future accounting returns. I also find that the determinants of the proportion of EBC are different between the two samples.

AbstractThe ability of banks to offer proprietary mutual funds has expanded over recent years, and the mutual fund industry has been a significant growth area for banks. I examine the growth and performance of bank proprietary bond mutual funds. The empirical results show no evidence that bank‐managed mutual funds underperform nonbank funds. I find some evidence that bank managers are more conservative than nonbank managers in terms of investment strategy and that banks appear more likely to target individual rather than institutional investors. Also, I find that abnormal fund performance does not appear to be a significant determinant of the net asset flows into and out of bank‐managed mutual funds. Rather, the results suggest bank investors rely mainly on past marketing information and the general reputation of the bank.JEL classification: G11, G21

ABSTRACTManuscript Type: EmpiricalResearch Question/Issue: We propose and test a new perspective on why the boards of some acquiring firms purchase a fairness opinion (FO). Specifically, we examine whether the board's knowledge explains the use of an FO and the market reaction to the FO.Research Findings/Insights: We find that FOs are more likely to be purchased when the acquiring firm's board feels uncertain about the deal. Specifically, we find that boards with more outside directors are more likely to use an FO, while boards whose directors hold more outside appointments (busy boards) are less likely to seek an FO. Moreover, we find that although the market reacts negatively to the FO, board characteristics both moderate and exacerbate the reaction. When an FO is used by a busy board, the market reacts more negatively to the merger announcement. In contrast, board independence and the average service years for directors seem to moderate the market's reaction to the FO.Theoretical/Academic Implications: The results of this study are consistent with the idea that a lack of knowledge and underlying transaction uncertainty motivates the board to purchase an FO. In addition, our empirical evidence supports a sophisticated market reaction, where the market recognizes the board's knowledge when assessing the necessity of the FO.Practitioner/Policy Implications: This study provides a new perspective on why boards use FOs. A board with more outside directors may be strong on monitoring, but may lack knowledge on the deal. This essentially provides an example of a cost associated with an independent board. Further, we show that the market can differentiate the types of boards that use an FO.

AbstractWe examine whether economic policy uncertainty (EPU) affects a board's chief executive officer (CEO) replacement decision. We find that high EPU reduces the likelihood of forced CEO turnover. Our results support the idea that performance assessment may be more difficult when uncertainty is high. We provide evidence that succession planning may be important to firms in reducing the effects of EPU, as firms with an identifiable heir apparent are not influenced by high EPU. Likewise, voluntary CEO turnovers are not affected by EPU. Overall, our results provide evidence that boards make personnel decisions in response to external macroeconomic pressures.

This study examines chief executive officer (CEO) compensation and turnover in socially responsible (SR) firms. We compare characteristics of SR firms with a matched sample of firms based on industry and size. Analysis of CEO compensation indicates that the link between CEO pay and firm performance is weaker for SR firms than for non‐SR firms. CEO turnover tests indicate that SR firms are more likely to experience CEO turnover following poor performance. Stock option grants to CEOs of SR firms do not appear to result in future risk‐taking behaviour, whereas such grants are significantly related to future risk at non‐SR firms.