Glenn Boyle

Retail Leasing: The Determinants of Shopping Center Rents

The determinants of lease rentals are of fundamental importance to real estate researchers and practitioners. Retail leases are unique in that they typically have two rental components: a base rent and an “overage” rent equal to a percentage of the tenants gross sales above some threshold level. In this paper, we develop and test a simple cash flow model of retail lease valuation that predicts that base rents are lower with higher percentage rent rates and are higher with greater threshold levels of sales. Using a sample of shopping center leases, regression analysis indicates that these tradeoffs are observed in the market.

Public Disclosure of Executive Compensation: Do Shareholders Need to Know?

Prior to 1997, New Zealand firms were not required to disclose the remuneration paid to their executive employees. We analyze the cross-sectional variation in New Zealand executive compensation during the first year of public disclosure and find no evidence of a positive relationship between pay and performance, regardless of firm size, risk, leverage, and board structure. We also find no link between CEO compensation and governance and ownership structures. Instead, CEO pay seems to depend primarily on firm size. These results are consistent with the view that the absence of public compensation disclosure results in greater agency problems, less efficient compensation policies, and CEO capture of boards of directors.

Price discrimination in shopping center leases

Abstract A simple model of rent determination for homogeneous shopping center space predicts that landlords use tenant characteristics, such as default probability and customer traffic-generating potential, to set rental rates in a discriminatory manner. Empirical tests conducted on a sample of shopping center leases support these predictions. Differences in contractual provisions do not appear to explain the observed rent dispersion among tenants favored by price discrimination, but are of importance for determining the rental liability of other tenants.

Capital structure choice and financial market liberalization: evidence from New Zealand

The extensive 1980s deregulation of New Zealand financial markets is exploited to provide a unique test of capital structure theory. Specifically, debt choices of New Zealand corporate firms during pre-reform (1982-1985) and post-reform (1986-1989) periods are analysed and compared. However, consistent with evidence from other countries, existing hypotheses are able to explain relatively little of the cross-sectional variation in either long- or short-term debt usage. More significantly, this lack of explanatory power is consistent across pre- and post-reform periods.

CEO presence on the compensation committee: a puzzle

The managerial power view of executive compensation suggests that CEO membership of the compensation committee is an open invitation to rent extraction by self-serving executives. However, using data from New Zealand – where CEO compensation committee membership was relatively common until quite recently – we find that annual pay increments for CEOs with this apparent advantage averaged four percentage points less than those enjoyed by other CEOs during the 1998–2005 period. This puzzling result cannot be explained by omitted governance variables, risk-return tradeoff considerations, selection bias, or compensation mis-measurement. We find some weak evidence suggesting it may be consistent with a form of optimal contracting.

Deposit Insurance and the Risk Premium in Bank Deposit Rates

Abstract By placing a ceiling on the amount of possible depositor loss, deposit insurance should result in a lower deposit risk premium. However, this effect may be modified if either the insurance promise has low credibility or the moral hazard incentives generated by deposit insurance result in a greater probability of bank default. Using financial and institutional panel data from thirteen countries, we find that the risk premium is over 40 basis points higher on average in uninsured countries than in countries that offer insurance up to some pre-specified maximum. However, the risk premium has a non-linear relationship with the level of maximum insurance coverage, suggesting that the market recognizes the moral hazard potential. Moreover, the effect of deposit insurance on the risk premium is weaker in countries with strong creditor rights, consistent with the view that investors view the latter as a substitute for explicit deposit insurance.

New Zealand Corporate Boards in Transition: Composition, Activity and Incentives Between 1995 and 2010

We document describe and interpret changes in New Zealand corporate board characteristics between 1995 and 2010 a period centred around the 2003 introduction of the NZX Corporate Governance Best Practice Code. Unsurprisingly the representation of non-executive independent and female directors on NZ boards rose during the period as did real chair and director fees and the importance of board committees while average board size fell. Perhaps more surprisingly much of this movement occurred before 2003. However the magnitude of these changes frequently varies according to firm size and there are some intriguing differences between New Zealand board characteristics and those prevailing in other larger countries. We use this information to identify an number of unanswered questions about New Zealand corporate boards.

Pay Peanuts and Get Monkeys? Evidence from Academia

In most countries, academic pay is independent of discipline, thus ignoring differences in labor market opportunities. Using some unique data from a comprehensive research assessment exercise undertaken in one such country -- New Zealand -- this paper examines the impact of discipline-independent pay on research quality. I find that the greater the difference between the value of a disciplines outside opportunities and its New Zealand academic salary, the weaker its research performance in New Zealand universities. The latter apparently get what they pay for: disciplines in which opportunity cost is highest relative to the fixed compensation are least able to recruit high-quality researchers. Paying peanuts attracts mainly monkeys.

New Zealand corporate boards in transition

Purpose – The purpose of this paper is to uncover the stylised facts about NZ corporate boards and identify unanswered questions about their composition, activity and incentives during the 16-year period between 1995 and 2010. Design/methodology/approach – The paper uses annual report data to document the evolution of 22 NZ board characteristics. The paper also informally compares these trends with those occurring in other countries. Findings – Unsurprisingly, the representation of non-executive, independent and female directors on NZ boards rose during the period, as did real chair and director fees and the importance of board committees, while average board size fell. Perhaps more surprisingly, much of this movement occurred before NZX governance reforms in 2003. Moreover, there are some intriguing differences between New Zealand and other, mainly larger, countries. Research limitations/implications – The analysis is largely descriptive and focuses on identifying questions rather than answering them. Or...

Holding onto Your Horses: Conflicts of Interest in Asset Management

Racehorse trainers operate unregulated asset management businesses in which the assets owned by outside clients compete with those owned by trainers for the latter’s time, care, and attention. However, market mechanisms appear to deal effectively with the resulting agency problem in situations where it matters most. In a sample of 8,000 racehorses and their associated stables, we find that client-owned horses do indeed perform worse than their trainer-owned counterparts in small stables that have relatively few outside clients but that the reverse is true in large stables where client-owners provide much of the trainer’s income: agents with more to lose apparently behave better. Moreover, they appear to have good reasons for behaving better: client-owned horses that underperform are more likely to be transferred to another stable, thereby causing a loss of income for the original trainer.