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Title: Executive compensation, tournament incentives, and employment agreements around IPOs
Author: Loukopoulos, Georgios
ISNI:       0000 0004 8499 470X
Awarding Body: University of Bath
Current Institution: University of Bath
Date of Award: 2019
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Initial public offerings (IPOs), executive compensation, and employment agreements have drawn attention in business, academia as well as financial press. Yet, despite that the literature have focused on large established firms, the role of top managers remuneration packages and their contractual agreements on IPOs is scarce, providing thus considerable scope for further research. With these in mind, this thesis explores the effect on internal and external tournament incentives on short- and long-term IPO performance. In addition, it examines the impact of managerial time horizon on CEO outcomes and IPO performance. Firstly, I find that, while both compensation and internal pay gap exhibit lower IPO first-day returns, underpricing is on average higher when there are high levels of industry and local pay gap. The negative effect of total CEO remuneration on the value of underpricing is concentrated among firms with high managerial discretion, while that of internal pay gap is reinforced among institutions with high agency conflicts. Additionally, my findings suggest that a positive association between industry tournament incentives and IPO first-day returns is stronger in less competitive industries as well as among firms with specialist and overconfident CEOs. In contrast, the positive impact of tournament incentives on underpricing is less pronounced in competitive Metropolitan Statistical Areas (MSA) and in firms with new CEOs. Second, I document that IPO firms with generously compensated CEOs and large pay disparities in the boardroom have lower failure rates and longer survival time in the periods following the offering. The relationship between CEO pay and IPO survival is strengthened among firms with lower agency conflicts, while the link between pay gap and IPO survival is pronounced when CEO succession planning is more important. Both measures of managerial pay are associated with lower information asymmetry, better valuation, and superior operating performance in the post-IPO market. The results are robust to alternative interpretations and additional tests. Finally, I find that fixed-term contracts have higher probability of turnover, while at-will agreements are less sensitive to CEO turnover. Firms with no employment agreements are positively associated with underpricing. I also document that firms run by fixed-term CEOs exhibit lower R&D and firm performance. On the other hand, firms led by CEOs with at-will agreements tend to increase investment through R&D and capital expenditures, and are associated with lower volatility. My results indicate that fixed-term contracts have lower survival rates, while at-will agreements have higher post-IPO performance.
Supervisor: Newton, David ; Gounopoulos, Dimitrios Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Executive Compensation ; Tournament Incentives ; CEO Pay Gap ; CEO Employment Contracts ; CEO Turnover ; Initial Public Offerings ; IPO Survival