Rajaram Veliyath

An Empirical Investigation of the Determinants of Outside Director Compensation

Using data on 200 large U.S. corporations in 1996, this study develops and tests a model in which the Compensation of Outside Directors is significantly related to Director Effort, External Monitoring, Internal Referents and Firm Performance, after controlling for Firm Size and Inside Ownership. There is some support for each set of hypotheses relating to the different independent variables in the model.

Agency influences on risk reduction and operating performance: An empirical investigation among strategic groups

Abstract The relationships between risk and performance were tested employing within and between analyses at the level of strategic groups in three different industries. As hypothesized, systematic risk did not exhibit a consistent relationship with performance. By contrast, all of the total correlations, the between-group correlations, and the within-group correlations of total risk with performance were in the hypothesized negative direction. These findings suggest that when risk-averse managers reduce total risk, the firms carnings performance is enhanced. The hypothesized differences between strategic groups in total risk were evident primarily in the computer and pharmaceutical industries. Performance also differed across strategic groups in these two industries, as well as among airlines. Contrary to expectations, systematic risk also differed across strategic groups in all three industries. These ANOVA results indicate that differences in strategic profiles between strategic groups engender differences in total risk, systematic risk, and performance .

Network Characteristics and Firm Performance: An Examination of the Relationships in the Context of a Cluster

The study examined the impact of spatial relationships on firm performance. It also assessed the impacts of network structural and relational characteristics on performance, as well as the moderating effects of these variables on the spatial relationship to performance linkages. The sample comprised 252 firms located in a mold industry cluster in the hejiang province of hina. Both in‐cluster ties and extra‐cluster ties positively impacted performance. However, the effects of distant ties were more pronounced. Tie stability had a positive effect whereas tie quality had a negative effect on performance. Network centrality, tie strength, and tie stability strengthened the relationship between in‐cluster ties and performance. By contrast, all network tie characteristics weakened and changed the form of the relationship between extra‐cluster ties and performance. The findings suggest the need for cluster firms to consciously cultivate distant linkages in their network ties in order to neutralize the tendencies for lock‐in and to arrest entropic deterioration in their respective clusters.

Business strategy and top management compensation: The mediating effects of employment risk, firm performance and size

Abstract We compare top management compensation among prospector, defender, and analyzer strategic types, and the effects of differences in managers employment risks, firm performance, and firm size. Prospectors performed better and they paid their top management group more than did analyzers. They were also bigger, their managers faced more employment risks, and they paid their CEOs more than did defenders or analyzers. Significant differences were found among the three strategic types in managers employment risks, firm performance, and size. On average, the strategic types whose managers faced greater employment risks also compensated their top management group more, providing evidence of a positive relationship between risk and return at the level of strategic types. Confirming previous findings, firm size constituted the greatest influence on top management compensation.

The performance correlates of ownership control: a study of U.S. and European MNE joint ventures in India

This study reports findings from an empirical examination of the relationship between ownership control and joint venture performance. It conceptualized ownership control as a continuous variable so that the range of values of optimal equity holdings could be derived. Thus, it was possible to empirically determine both the form and strength of the relationship, aspects that prior studies have not addressed fully. The empirical examination was carried out on a longitudinal sample of joint ventures between U.S. and European MNEs and local firms in India. Results clearly show that the relationship between ownership control and performance is curvilinear. Contrary to the prevailing views that advocate an equal sharing of equity, performance was found to improve with increasingly unequal levels of ownership.

Social Embeddedness, Overt and Covert Power, and Their Effects on CEO Pay: An Empirical Examination Among Family Businesses in India

The literature on CEO compensation reflects two common biases: (a) the dominant use of the agency theory perspective and (b) the almost exclusive use of U.S. and U.K samples. Agency theory views compensation as a consequence of the incentive contracts and the processes of corporate governance. However, little is known about the determinants of CEO compensation in developing countries. Considering that foreign direct investment of U.S. multinational enterprises increased 10-fold over the past decade, mostly in developing economies, there is a great need to understand the dynamics of pay setting in these foreign contexts. Overall, there is an imperative need to explore alternative theoretical perspectives as well as investigate nontraditional contexts to broaden existing theoretical premises. In an attempt to address this need, this study investigates the CEOs social embeddedness and overt and covert power as determinants of CEO pay in a sample of Indian family-controlled firms. Using a time-series, cross-sectional regression analysis, we find family shareholding and the percentage of inside directors on the board (identified as bases of overt power for the CEO) to be the predominant influences on CEO pay. By contrast, some of the identified bases of covert power, such as the CEOs tenure, age, education, and firm diversification, are not significant. Surprisingly, controls for firm size and performance also exhibit no influence on CEO pay. These findings offer a useful point of reference against which results from western studies can be compared to formulate more holistic theories of CEO pay.

Moderators of the Relationship between Director Stock-Based Compensation and Firm Performance

Research on the efficacy of stock-based compensation for outside directors has documented a weak or non-existent relationship with firm performance. Other variables also influence the relationships between these two constructs. Consistent with agency theory, we show, for a sample of 450 Standard & Poor 500 firms over the 1995-97 period that the use of director stock options and grants ratios was more strongly associated with positive performance in firms with (a) higher investment opportunities, and (b) weaker external monitoring. These findings have implications for compensation committees in the structuring of director compensation. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

Top Management Compensation and Shareholder Returns: Unravelling Different Models of the Relationship

In order to further examine the relationship between executive pay and company performance, this paper investigates the linkage between two separate components of executive compensation (i.e. cash compensation and stock options) and market return performance, among a selected sample of US pharmaceutical company CEOs and COOs. In the surveyed sample, changes in cash compensation were found to exhibit a between-firm relationship with lagged market returns, while Δ stock option grants displayed a within-firm relationship. The former result suggests a commonality in practices across all firms, while the latter denotes idiosyncratic firm-specific practices. These contrasts represent different degrees of the agency problem in the contracts for cash compensation as compared to the stock option components. Levels of cash compensation were affected primarily by firm size. Market returns were not instrumental influences on the levels of both compensation components

Emergent Realities of Global Competition

Purpose – The purpose of the paper is to discuss the new realities of global rivalry which has been elevated to include economic competition between nations, in addition to the more traditional forms of competitive interactions between firms.Design/methodology/approach – The Introduction section discusses the changes that global geopolitics and the economy have undergone from the end of the Second World War to the present time. The 11 macro‐economic factors that have impacted international business over this time period are then discussed. The next section of the paper discusses the nature of the new relational assets of firms, their locations, and the means of harnessing and utilizing them in knowledge‐based economic competition. A series of propositions relating to the nature of these assets, how managers of corporations can access them, the roles and skill sets required of these managers, and the competitive advantages these assets provide, are then presented. The Conclusion section explores the impact...

Globalization and International R&D Flows into Emerging Markets: Nomothetic Evidence

In this paper we analyze the impact of some determinants of international R&D expenditures made by overseas affiliates of MNCs. We also examine whether globalization has expedited international R&D investment flows since 1995, the year that internet access was opened up to mass usage and trade barriers began to concertedly decrease worldwide, following the emergence of the World Trade Organization (WTO). We find evidence that ethnic diversity, political stability, and patent rights enforcement promotes international flows of R&D investments. Increased workers’ educational levels appear to have contradicting effects on international R&D investment flows. When we isolated the effects of globalization into its component forces of technological advancement and trade liberalization, we found some notable interaction effects, especially involving trade barriers. Increased globalization since 1995 has increased international R&D flows in the face of diminishing tariff barriers. A dataset containing more countries and more recent time horizons should help to unravel some of the counter-intuitive and confounding results that our study has unearthed.