capitalization of government support in agricultural land prices what do we know abstract the objective of this paper is to provide an overview of existing literature both theoretically and empirically on the extent to which agricultural subsidies do translate into higher land values and rents and finally benefit landowners instead of agricultural producers our review shows that agricultural support policy instruments contribute to increasing the rental price of farmland and that the extent of this increase closely depends on the level of the supply price elasticity of farmland relative to those of other factors inputs on the one hand and on the range of the possibilities of factor input substitution in agricultural production on the other hand the empirical literature shows that land prices and rents have in general a significant positive and inelastic response to government support such inelastic response is thought to reflect the uncertain future of the farm programmes and in general studies have indicated that land prices are more responsive to government based returns than to market based returns

outcome based accountability theory and evidence abstract a firm s payoffs can often depend on whether it exceeds a threshold of performance in a principal agent setting we demonstrate that the optimal contract induces efficient effort by basing firing decisions solely on whether the agent was successful even though the absolute level of performance is more informative we test the predictions of our model using thirty seasons of nfl data we find that a coach is 6 percentage points more likely to be fired after a close loss beyond this the margin of victory has no significant impact on firing probabilities despite being more informative about future success also consistent with the predictions of our model coaches maximize team effort by playing their best players when doing so has the largest impact on the probability of winning

testing capital structure models on philippine listed firms this study examines the ability of the trade off to model and the pecking order po model to explain the financing behaviour of philippine listed firms from 1990 to 2001 using panel data regression techniques the firms leverage ratios move towards their optimal level holding up the to model the results however show better support for the po model as leverage and profitability are negatively related while financing deficit mostly explains the annual change in total liabilities furthermore in joint tests only the fitted values from the po model equation continue to have additional explanatory power over fitted values from the to model firms issued more equity than debt from 1990 to 1996 when stock market prices were increasing rapidly but this still fits the more complex version of the po model

a multiplicative model of optimal ceo incentives in market equilibrium this paper presents a unified theory of both the level and sensitivity of pay in competitive market equilibrium by embedding a moral hazard problem into a talent assignment model by considering multiplicative specifications for the ceo s utility and production functions we generate a number of different results from traditional additive models first both the ceo s low fractional ownership the jensen murphy incentives measure and its negative relationship with firm size can be quantitatively reconciled with optimal contracting and thus need not reflect rent extraction second the dollar change in wealth for a percentage change in firm value divided by annual pay is independent of firm size and therefore a desirable empirical measure of incentives third incentive pay is effective at solving agency problems with multiplicative impacts on firm value such as strategy choice however additive issues such as perk consumption are best addressed through direct monitoring jel d2 d3 g34 j3

corporate finance in developing countries new evidence for india abstract recent work by singh and hamid 1992 corporate financial structures in developing countries and singh 1995 corporate financial patterns in industrializing economies a comparative international study has suggested that large firms in a number of developing countries including india use much more external finance in general and equity finance in particular than those in developed countries however the contrast is in part a product of methodological differences and india is much less different from countries such as france and italy the singh results are not due merely to bias arising from the focus on the largest companies since the rest of the indian corporate sector also issues large amounts of equity via informal networks rather than organized stock exchanges the importance of such issues suggests the need for further research before policy conclusions can be drawn

assessing the influence of direct payments on the rental value of agricultural land economic theory suggests that coupled and decoupled direct payments have different impacts on agricultural rental values because of the different production responses associated with these payments this study investigates the impact of both coupled and decoupled eu cap direct payments on rental values in northern ireland using panel data taken from the farm business survey for the period from 1994 to 2002 theoretically agricultural land rents are a function of expected market returns and expected associated direct payments the unobservable nature of expected returns means that actual market returns must be used as a proxy for the former in the empirical specification as a consequence the problem of bias due to expectation error arises using a gmm technique to take account of this problem the results of this study show that the impact of cap direct payments on rental values depends on the type of payment and on the nature of the production characteristics of the associated agricultural commodity

optimal vs traditional securities under moral hazard this paper provides an explanation for the widespread use of traditional securities by wellestablished firms standard moral hazard models predict that equity debt and warrants are almost never optimal financing instruments i show that issuing these securities is nevertheless nearly optimal the issuer would gain very little by using non traditional securities instead combined with equity one debt issue without multiple layers of seniority and one warrant issue without multiple exercise prices suffice to achieve near optimality the near optimality of traditional financing depends crucially on the issuer s ability to use war rants in addition to debt and equity

contracting theory and accounting abstract this paper reviews agency theory and its application to accounting issues i discuss the formulation of models of incentive problems caused by moral hazard and adverse selection problems i review theoretical research on the role of performance measures in compensation contracts and i compare how information is aggregated for compensation purposes versus valuation purposes i also review the literature on communication including models where the revelation principle does not apply so that nontruthful reporting and earnings management can take place the paper also discusses capital allocation within firms including transfer pricing and cost allocation problems

who really benefits from agricultural subsidies evidence from field level data if agricultural subsidies are largely capitalized into farmland values then expanding support for agriculture may not benefit farmers who rent the land they farm suddenly reducing subsidies may be problematic to the extent that land values already embody expectations about future subsidies existing evidence on the incidence of subsidies on land values is mixed identification is obscured by unobserved or imprecisely measured factors that tend to be correlated with subsidies especially land quality and time varying factors like commodity prices and adverse weather events a problem that has received less attention is the fact that subsides and land quality on rented land may differ from owned land since most farms possess both rented and owned acreage farm level measures of subsidies land values and rental rates may bias estimated incidence using a new field level data set that for the first time precisely links subsidies to land parcels we show that this bias is considerable where farm level estimates suggest an incidence of 20 to 79 cents of the marginal subsidy dollar field level estimates from the same farms indicate that landlords capture just 10 25 cents the size of the farm and the duration of the rental arrangement have substantial effects incidence falls by 5 15 cents per acre when doubling total operated acres and the incidence falls by 0 1 1 2 cents with each additional year of the rental arrangement low incidence of subsides on rents combined with the farm size and duration effects suggest that farmers renting land have monopsony power

incentives for managers and inequality among workers evidence from a firm level experiment we present evidence from a firm level experiment in which we engineered an exogenous change in managerial compensation from fixed wages to performance pay based on the average productivity of lower tier workers theory suggests that managerial incentives affect both the mean and dispersion of workers productivity through two channels first managers respond to incentives by targeting their efforts towards more able workers implying that both the mean and the dispersion increase second managers select out the least able workers implying that the mean increases but the dispersion may decrease in our field experiment we find that the introduction of managerial performance pay raises both the mean and dispersion of worker productivity analysis of individual level productivity data shows that managers target their effort towards high ability workers and the least able workers are less likely to be selected into employment these results highlight the interplay between the provision of managerial incentives and earnings inequality among lower tier workers

on the relative performance of linear vs piecewise linear threshold intertemporal incentives this paper employs numerical simulations to compare the relative performance of linear contracts with piecewise linear threshold contracts in the case where the agent chooses actions over time these contracts are restricted to be functions of the ending value of aggregate output we find strong evidence that only linear contracts need be considered in comparison with piecewise linear threshold contracts in the situation where cumulative output is only updated periodically and the agent s utility function is exponential this finding holds even when there are only two periods and hence one change of action by the agent however we find that the best piecewise linear threshold contract is significantly superior to the best linear contract when the agent has a power utility function these numerical simulations also call into question the use of a cap when the agent s compensation is based on the ending value of aggregate output and the agent s effort takes place over time

the capitalization of coupled and decoupled cap payments into land rental rates this article explores the extent to which payments under the common agricultural policy cap are capitalized into land rents in ireland with implications for the transfer efficiency of such payments since subsidies may not benefit targeted recipients if they are capitalized into input prices capitalization in the years preceding and following the decoupling of agricultural support payments from agricultural production is explored in the period prior to decoupling direct support pillar 1 payments were highly capitalized into irish agricultural rents 67 90 cents per euro of subsidies while in the post decoupling period capitalization appears to have declined somewhat

who are the producers and consumers value chains and food policy effects in the wheat sector in pakistan we develop a disaggregated nominal rate of assistance nra methodology to disentangle the welfare impacts of policies for various interest groups along the value chain to disaggregate effects within the producer and consumer umbrellas we apply our value chain nra methodology to the case of pakistan s wheat price and trade policy we analyze the welfare implications for various agents in the wheat flour value chain from 2000 to 2013 a period characterized by major global price volatility and by regular adjustments of domestic policies we find that the wheat policy has generally benefitted flour consumers and wheat traders at the expense of wheat farmers with limited effects on flour millers our findings illustrate that the welfare implications of policies can be quite different within the producer and consumer umbrellas which has potentially important implications for economic and political economy analyses and for the design of policies that aim to target the poorest groups along value chains

optimal portfolio choice for long horizon investors with nontradable labor income this paper examines how risky labor income and retirement affect optimal portfolio choice with idiosyncratic labor income risk the optimal allocation to stocks is unambiguously larger for employed investors than for retired investors consistent with the typical recommendations of investment advisors increasing idiosyncratic labor income risk raises investors willingness to save and reduces their stock portfolio allocation towards the level of retired investors positive correlation between labor income and stock returns has a further negative effect and can actually reduce stockholdings below the level of retired investors financial advisors typically recommend that their customers invest more in stocks than in safe assets when they are working and to shift their investments towards safe assets when they retire jagannathan and kocherlakota 1996 malkiel 1996 by contrast the standard academic models of portfolio choice merton 1969 1971 samuelson 1969 show that retirement is irrelevant for portfolio decisions if investment opportunities are constant and human capital is tradable in this case the fraction of wealth optimally invested in risky assets should be constant over the lifetime of an individual recent research building on the pioneering work by merton 1971 shows that time varying investment opportunities result in portfolio rules with an intertemporal hedging component whose magnitude depends on the investment horizon of the investor kim and omberg 1996 balduzzi and lynch 1997 brennan schwartz and lagnado 1997 brandt 1999 campbell and viceira 1999 2001 barberis 2000 with time variation in investment opportunities retirement and death play an instrumental role as events that exogenously fix the individual s investment horizon more importantly retirement also marks the time at which individuals stop working and thereafter must live off their lifetime savings and possibly transfers from this perspective retirement matters for portfolio choice

an analysis of the use of accounting and market measures of performance in executive compensation contracts prior research has provided useful insights into the structure of compensation plans and their incentive effects however one important limitation of these studies is the virtual absence of any cross sectional analyses of the attributes of compensation contracts 2 this absence is related in part to the problems associated with controlling for other factors that affect compensation that is compensation contracts are

the effects of china s split share reform on firms capital structure choice abstractchina s split share structure reform in 2005 2006 mitigates agency conflicts between controlling shareholders and minority shareholders and thus may bring substantial changes to corporate financing behaviour this article examines the impact of that reform on the capital structure decisions of firms by applying a variety of trade off and pecking order models using data from 1176 non financial chinese listed firms during the period 2000 2012 we present empirical evidence indicating that equity tracks the financing deficit better than debt in chinese firms a finding which is not consistent with pecking order theory this phenomenon is more prominent after 2006 as share reform increases trading activity in the secondary stock market and improves the transparency of financial markets in addition chinese firms have an optimal leverage ratio and they adjust below target leverage ratios faster than above target leverage ratios after the implementation of share structure reform although they make sy

the impacts of different farm programs on cash rents county level annual observations for iowa from 1996 through 2000 were used to measure the impacts of farm program payments on cash rental rates the econometric analysis explicitly incorporates spatial autocorrelation cash rental rates were found to increase by almost one dollar per acre for each additional dollar per acre paid for market loss assistance and production flexibility contracts whereas conservation reserve program payments appear to exert no effect on cash rental rates a counterintuitive finding that warrants further examination is the small but negative impact of deficiency payments on cash rental rates

the performance effect of managerial ownership evidence from china abstract by examining a sample of non listed chinese firms we provide the first evidence from china for the effect of managerial ownership on firm performance in matching sample comparisons we find that firms of significant managerial ownership outperform firms whose managers do not own equity shares our further results indicate the relation between firm performance and managerial ownership is nonlinear and the inflection point at which the relation turns negative occurs at ownership above 50 compared with previous studies our results are less likely to suffer from an endogeneity problem due to the non list nature of our sample and the unique institutional environment in china

uncertainty risk and incentives theory and evidence uncertainty has qualitatively different implications than risk in studying executive incentives we study the interplay between profitability uncertainty and moral hazard where profitability is multiplicative with managerial effort investors who face greater uncertainty desire faster learning and consequently offer higher managerial incentives to induce higher effort from the manager in contrast to the standard negative risk incentive trade off this learning by doing effect generates a positive relation between profitability uncertainty and incentives we document empirical support for this prediction this paper was accepted by wei jiang finance

top executive rewards and firm performance a comparison of japan and the united states this paper studies top executive turnover and compensation and their relation to firm performance in the largest japanese and u s companies japanese executive turnover and compensation are related to earnings stock returns and to a lesser extent sales performance measures the fortunes of japanese top executives therefore are positively correlated with stock performance and current cash flows or with factors contributing to such performance the relations for the japanese executives are generally economically and statistically similar to those for their u s counterparts there is some evidence however that the fortunes of japanese executives are more sensitive to low income but less sensitive to stock returns than those of u s executives

optimal incentive contracts in the presence of career concerns theory and evidence this paper studies optimal incentive contracts when workers have career concerns concerns about the effects of current performance on future compensation we show that the optimal compensation contract optimizes total incentives the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract thus the explicit incentives from the optimal compensation contract should be strongest for workers close to retirement because career concerns are weakest for these workers we find empirical support for this prediction in the relation between chief executive compensation and stock market performance

debt and the marginal tax rate abstract do taxes affect corporate debt policy this paper tests whether the incremental use of debt is positively related to simulated firm specific marginal tax rates that account for net operating losses investment tax credits and the alternative minimum tax the simulated marginal tax rates exhibit substantial variation due to the dynamics of the tax code tax regime shifts business cycle effects and the progressive nature of the statutory tax schedule using annual data from more than 10 000 firms for the years 1980 1992 i provide evidence which indicates that high tax rate firms issue more debt than their low tax rate counterparts

the optimal two bracket linear income tax abstract we investigate two bracket piecewise linear income tax structures in a two class economy pareto efficient tax schedules of this type feature at least one marginal tax rate equal to zero and that the marginal tax rate may be increasing and declining we then investigate the optimal structure of taxation when the social welfare function utility function and distribution of abilities are characterized as in the standard optimal linear income tax problem in all cases the second marginal tax rate is less than the first rate but progressivity in the sense of a uniformly rising average tax rate generally obtains

wealth and executive compensation using new data on the wealth of swedish ceos i show that higher wealth ceos receive stronger incentives since high wealth excluding own firm holdings implies low absolute risk aversion this is consistent with a risk aversion explanation to examine whether wealth is likely to proxy for power i use lagged wealth typically measured before the ceo was hired and the results remain for one of two incentive measures also the wealth incentive result is not stronger for ceos likely to face limited owner oversight finally wealth is unrelated to pay levels and is hence unlikely to proxy for skill the compensation of chief executives of large listed companies is often largely in the form of risky instruments such as shares and options since share prices are affected by many factors outside management control this exposes ceos to risk according to standard agency theory the risk inherent in incentive compensation should reduce optimal incentives looking across firms the evidence that volatile stock prices reduce incentives in actual compensation has been mixed see e g aggarwal and samwick 1999 core and guay 2001 and prendergast 2002 for different views the importance of risk for incentives is thus in dispute 1 this paper takes another look at ceo incentives exploiting variation in risk aversion rather than risk decreasing absolute risk aversion implies that a wealthy ceo is less risk averse than a similar same coefficient of relative risk aversion but less wealthy ceo wealth should therefore proxy for risk aversion wealth may also be related to ceo skill and power obviously using wealth variation empirically hinges on having adequate data on individual wealth i use swedish tax filings to construct a proxy of wealth in sweden tax authorities provide data on aggregate yearly income

do decoupled payments affect u s crop area preliminary evidence from 1997 2000 the federal agriculture improvement and reform fair act of 1996 changed the manner in which the u s government provides direct payments to u s farmers under the fair act producers are eligible for fixed production flexibility contract pfc payments independent of the production of specific crops 1 with a few exceptions 2 supplemental market loss assistance mla payments authorized in subsequent legislation have been made to producers under similar terms i e a producer cannot increase or decrease mla payments by increasing or decreasing production the united states has declared that pfc

the other side of the trade off the impact of risk on executive compensation the principal agent model of executive compensation is of central importance to the modern theory of the firm and corporate governance yet the exiting empirical evidence supporting it is quite wea

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

executive compensation and principal agent theory the empirical literature on executive compensation generally fails to specify a model of executive pay on which to base and test hypotheses regarding its determinants in contrast this paper analy

performance thresholds in managerial incentive contracts performance thresholds are commonly used in executive compensation contracts we examine the contractual nonlinearity associated with performance thresholds and its incentive implications incorporating a performance threshold into a standard principal agent model of a linear contract we show that pay schemes using a performance threshold are optimal by truncating a linear scheme at poor performance the threshold mitigates agency costs associated with the downside risk of production examining ceo compensation data we find evidence of the role of performance thresholds as a consequence of under threshold performance the tobit estimator is shown to increase pay performance sensitivity notably improving upon the standard ols estimator

the tenuous trade off between risk and incentives empirical work testing for a negative trade off between risk and incentives has not had much success the data suggest a positive relationship between measures of uncertainty and incentives rather than the posited negative trade off i argue that the existing literature fails to account for an important effect of uncertainty on incentives through the allocation of responsibility to employees when workers operate in certain settings firms are content to assign tasks to workers and monitor their inputs by contrast when the situation is more uncertain they delegate responsibility to workers but to constrain their discretion base compensation on observed output

common agricultural policy effects on dynamic labour use in agriculture abstract the aim of this study is to investigate the effects of direct payments and rural development measures of the eu s common agricultural policy cap on employment in agriculture we work with a dynamic labour demand equation augmented by the full set of policy instruments of the cap which is estimated on a panel dataset of 69 east german regions we present results for four estimators which differ in how they eliminate the fixed effects and how they address the endogeneity of the lagged dependent variable the results suggest that there were few desirable effects on job maintenance in agriculture while there is some indication that investment subsidies have halted labour shedding on farms a rise in the general wage level reduced labour use in agriculture changes in direct payments had no employment effects generally labour adjustment exhibits a strong path dependency

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

quota based compensation plans for multiterritory heterogeneous salesforces we compare quota based salesforce compensation plans with the blss plan i e the optimal curvilinear agency theory based compensation plans proposed in basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 a quota plan pays a fixed salary which is supplemented by commission income that is a prespecified fraction of the dollar sales that exceed the quota for a salesforce comprised of multiple salespersons territories we consider a basic quota plan where the commission rate and salary remain the same across salespersons however quotas vary across salespersons territories compared to the blss plan that is individually tailored to each salesperson territory the basic quota plan s total nonoptimality in profit has two components i a shapeinduced nonoptimality arising from the fact that the quota based plan does not have the same optimal shape as the curvilinear blss pl

are ceos really paid like bureaucrats a common view is that there is little correlation between firm performance and ceo pay using a new fifteen year panel data set of ceos in the largest publicly traded u s companies we document a strong relationship between firm performance and ceo compensation this relationship is generated almost entirely by changes in the value of ceo holdings of stock and stock options in addition we show that both the level of ceo compensation and the sensitivity of compensation to firm performance have risen dramatically since 1980 largely because of increases in stock option grants

determinants of corporate capital structure evidence from hungarian firms this paper investigates the capital structure of hungarian firms using a cross section and a panel data approach the data set is composed of balance sheet data and information on market structure for 1100 firms from 1992 to 1996 evidence is found of imperfections that constrain firms in the achievement of their optimal capital structure but also some positive indications there are no distortions typical of the planned system and no signs of the presence of soft budget constraints

pecking order or trade off hypothesis evidence on the capital structure of chinese companies this study tests the pecking order and trade off hypotheses of corporate financing decisions using a cross section of the largest chinese listed companies the study is built on allen 1993 baskin 1989 and adedeji 1998 to set up three models in which trade off and pecking order theories give distinctively different predictions 1 the determinants of leverage 2 the relationship between leverage and dividends and 3 the determinants of corporate investment in model 1 a significant negative correlation is found between leverage and profitability in model 2 a significant positive correlation between current leverage and past dividends is found these results broadly support the pecking order hypothesis over trade off theory however model 3 is inconclusive overall the results provide tentative support for the pecking order hypothesis and demonstrate that a conventional model of corporate capital structure can explain the financing behaviour of chinese companies

top management compensation and capital structure the interrelationship between top management compensation and the design and mix of external claims issued by a firm is studied the optimal managerial compensation structures depend on not only the agency relationship between shareholders and management but also the conflicts of interests which arise in the other contracting relationships for which the firm serves as a nexus we analyze in detail the optimal management compensation for the cases when the external claims are 1 equity and risky debt and 2 equity and convertible debt in addition to the role of aligning managerial incentives with shareholder interests managerial compensation in a levered firm also serves as a precommitment device to minimize the agency costs of debt the optimal management compensation derived has low pay performance sensitivity with convertible debt instead of straight debt the corresponding optimal managerial compensation has high pay to performance sensitivity a negative relationship between pay performance sensitivity and leverage is derived our results provide a reconciliation of the puzzling evidence of jensen and murphy 1990 with agency theory other testable implications include 1 a relationship between the risk premium in corporate bond yields and top management compensation structures and 2 the announcement effect of adoption of executive stock option plans on bond prices the model yields implications for management compensation in banks and federal deposit insurance reform our results explain the dynamics of top management compensation in firms going through financial distress and reorganization

accounting earnings and top executive compensation abstract this paper investigates the role of accounting earnings in top executive compensation contracts it provides evidence in support of the hypothesis that earnings based incentives help shield executives from market wide factors in stock prices the paper demonstrates that earnings reflect firm specific changes in value but are less sensitive to market wide movements in equity values as a result the inclusion of earnings based performance measures in executive compensation contracts helps shield executives from fluctuations in firm value that are beyond their control the hypothesis is shown to explain cross sectional variation in the use of earnings based incentives

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

risk aversion performance pay and the principal agent problem this paper calculates numerical solutions to the principal agent problem and compares the results to the stylized facts of ceo compensation the numerical predictions come from parameterizing the models of grossman and hart and of holmstrom and milgrom while the correct incentives for a ceo can greatly enhance a firm s performance providing such incentives need not be expensive for many parameter values ceo compensation need increase only by about 10 for every 1 000 of additional shareholder value for some values the amount is 0 003 cents

testing static tradeoff against pecking order models of capital structure a critical comment abstract in a recent paper shyam sunder and myers 1999 introduce a new test of the pecking order model this comment shows that their elegantly simple test generates misleading inferences when evaluating plausible patterns of external financing our results coupled with the power problem with the static tradeoff model documented by shyam sunder and myers indicate that their empirical evidence can evaluate neither the pecking order nor static tradeoff models alternative tests are needed that can identify the determinants of capital structure and can discriminate among competing hypotheses

the impact of decoupled payments on u s cropland values an extensive literature has shown that various farm programs may influence the value of farmland but other studies have not examined the cropland price effects of direct or decoupled payments separate from countercyclical payments this study uses nationally representative confidential field level panel data with farmer reported per acre land values we analyze the impact of decoupled and other farm program payments on farmland values using a fixed effects model and controlling for various factors that influence farmland values we find that an additional dollar of decoupled payments has a large and statistically significant impact on farmland values of about 18 per acre these results are comparable with similar studies undertaken in europe

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

quota bonuses with heterogeneous agents theoretical articles on incentive systems almost exclusively focus on linear compensations while in practice nonlinear elements such as quota bonuses are not uncommon our article tries to bridge that gap it shows how the use of quotas can increase the owners profits which agents are targeted by these incentives and which factors determine the optimal bonus

capitalization of the single payment scheme into land value generalized propensity score evidence from the eu this paper estimates the capitalization of the single payment scheme sps into land values the theory suggests a nonlinear and discontinuous relationship between the sps and land rents in empirical analysis we employ unique farm level panel data and apply the generalized propensity score matching approach our estimates suggest a 6 to 10 sps capitalization rate on average in the european union the nonfarming landowners gains from the sps are only 4 however there is a large variation in the capitalization rate for different sps levels and between different member states 3 to 94

performance standards and optimal incentives abstract this paper analyzes incentive design when agents effort influences an uncertain output governed by a random process with semi heavy tails we find that the second best incentive contract pays an output increasing but bounded fee with a shape resembling performance standard contracts that pay a fixed salary plus a capped bonus in this contract the pay performance sensitivity around the standard increases decreases with the frequency with which performance is measured and with the kurtosis volatility parameter of the performance probability distribution we also find that the optimal maximum bonus increases with volatility but decreases with the kurtosis parameter of the performance distribution

piecewise linear incentive schemes general outlook and stabilization theories and policies of piecewis e linear incentive schemes are studied in a setting of moral hazard and adverse selection the form of the best such function is analyzed particular attention is given to the loss from using piecewise linear schemes relative to optimal schemes as well as the gain from usin g simpler functional forms such as the linear functions the incentive problem is studied under various informational assumptions which allow some calculations of the value of information copyright 1988 by the editors of the scandinavian journal of economics

the effect of agricultural policy on farmland values the extent to which agricultural support programs have been capitalized into farmland prices has been examined in this study a present value land price model was developed which decomposes returns to the land base into its two possible sources farm production and government subsidies and allows the discount rates associated with these two income sources to vary the empirical results indicate that government payments are discounted less than marketbased returns in ontario thus government payments have been viewed as a more stable source of income to ontario farm operators during the last half century than market based returns

introducing convexity into optimal compensation contracts abstract we study when it is appropriate to add a convex component such as stock options to an optimal managerial compensation contract we show that convexity is introduced when managers have moderate levels of relative risk aversion and decreasing absolute risk aversion in addition we study how convexity is affected as the distribution of outcomes becomes more skewed toward low outcomes here we show that while convexity increases when skewness is increased without regard to the effect on mean stock price the opposite effect results when increases in skewness leave the mean stock price unchanged

the dependence of pay performance sensitivity on the size of the firm i analyze the relationship between firm size and the extent to which executive compensation depends on the wealth of the firm s shareholders i use a simple agency model to motivate an econometric model of this relationship estimating this model on chief executive officer ceo compensation data using nonlinear least squares i determine that pay performance sensitivity as defined by jensen and murphy 1990b appears to be approximately inversely proportional to the square root of firm size however measured i also analyze the properties of pay performance sensitivity for teams of executives working for the same firm and show it to have similar properties as ceo pay performance sensitivity

the impact of decoupled payments on farm choices conceptual and methodological challenges abstract in this paper we review the methodological framework for analysing decoupled payments in models of agricultural production market and technological uncertainty farm efficiency credit constraints farm household choices involving extra agricultural decisions policy uncertainty and long run impact of decoupling on investment and land values are the relevant issues that should be pursued by methodological and empirical analysis future research should refine the analysis of decoupled payments mainly trying to provide results that can be useful for policy simulation to bridge the gap between analysis at the individual level and sector policy models

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

ceo incentives and firm size we develop a model that clarifies how to measure ceo incentive strength and how to reconcile the enormous differences in pay sensitivities between executives in large and small firms the crucial parameter is shown to be the elasticity of ceo productivity with respect to firm size we find that ceo marginal products rise significantly with firm size confirming rosen s conjecture that ceos of large firms have a chain letter effect on firm performance and overall ceo incentives are roughly constant or decline slightly with firm size we employ a multitask model to discuss implications for the design of control systems

implementing high powered contracts to motivate intertemporal effort supply we characterize the optimal contract between a principal and a risk neutral wealth constrained agent when an adverse selection problem follows a moral hazard problem the optimal contract in this setting often is more steeply sloped for the largest output levels than is the optimal contract in either the standard moral hazard setting or the standard adverse selection setting the large incremental rewards for exceptional performance motivate the agent to deliver substantial effort both before and after he acquires privileged information about the production environment

the optimal shape of compensation contracts with earnings management the research question of why earnings management occurs is decomposed into two questions in this article which component of executive compensation generates incentives for earnings management and why is the compensation structured that way in the first place we first use as a dynamic stochastic equilibrium model to show that big bath and earning overstatement can co exist as equilibrium financial reporting strategies when thresholds are used in compensation contracts in order to understand the use of performance thresholds as a prevailing compensation strategy in practice we then derive the optimal compensation contract when the manager is privately informed about economic earnings and his expertise in managing earnings equilibria exist in which the inactive region below a threshold in compensation should be economically significant

ceo stock based compensation an empirical analysis of incentive intensity relative mix and economic determinants the use of stock based compensation for u s ceos has increased significantly throughout the 1990s research interest in particular on stock option compensation has similarly increased yet contradictory results create questions about the theoretical underpinnings therefore we revisit the controversy surrounding stock option awards and we further the understanding of restricted stock grants which have escaped similar research focus using a recent data set we obtain convincing empirical support for most theoretical predictions about stock option awards we also find that restricted stock due to its linear payoffs is relatively inefficient in inducing risk averse ceos to accept risky value increasing investment projects copyright 2000 by university of chicago press