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The Journal of Real Estate Finance and Economics

Erschienen in:

01.02.2015

Governance, Conference Calls and CEO Compensation

verfasst von: S. McKay Price, Jesus M. Salas, C. F. Sirmans

Erschienen in: The Journal of Real Estate Finance and Economics | Ausgabe 2/2015

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Abstract

We study the relations between governance mechanisms (internal and external), conference call voluntary disclosures (incidence and length), and CEO compensation using hand-collected data on conference calls, corporate governance, and compensation. We hypothesize and show that institutions push for more frequent and longer conference calls in order to obtain more information with which to evaluate their investment. While independent directors push to hold conference calls, they may also prefer to have shorter conference calls to avoid potential lawsuits, proprietary costs, and/or loss of reputation that can arise from releasing too much information. Entrenched executives seek to minimize risk (such as employment and/or litigation risk) by limiting the length of conference calls or by avoiding conference calls altogether. In addition, contrary to recently proposed hypotheses, we find that executives do not receive additional compensation for bearing the risks of holding voluntary conference calls.

Vorheriger Artikel Competition, Auctions & Negotiations in REIT Takeovers

Nächster Artikel Housing Markets with Foreign Buyers

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In the letter to shareholders, 2011 Annual Report, released April, 2012.

http://blogs.wsj.com/canadarealtime/2013/09/26/blackberry-takes-a-breather-cancels-earnings-conference-call/

http://online.wsj.com/article/SB10000872396390443720204578002362100327312.html

In the letter to shareholders, 2011 Annual Report, released April, 2012.

http://www.reit.com/Articles/Vornados-Steven-Roth-Dishes-on-Conference-Calls-Portfolio.aspx

Zendrain, Alexandra, “Vornado Realty Trust: S&P Intraday Gainer,” TheStreet.com, April 16, 2012.

http://blogs.wsj.com/developments/2012/04/13/vornados-roth-ending-silence-company-to-hold-investor-calls/

http://www.real-estate-entrepreneur.com/index.php/north-america/143-united-states-of-america/762-steven-roth-vornado-realty-trust-company-will-hold-investor-calls.

Healy and Palepu (2001), Table 1, p.411.

The unique aspects of the REIT structure have been utilized in other studies as well. For example, Allen and Sirmans (1987), Howe and Shilling (1988), Jaffe (1991), Wang et al. (1992), Damodaran and Liu (1993), Ling and Ryngaert (1997), Vincent (1999), Brown (2000), Kallberg et al. (2000), Gentry et al. (2003), Baik et al. (2008), Hartzell et al. (2008), and Kang and Zhao (2010) examine topics ranging from corporate governance, to disclosures, to security offerings.

The only exception to this rule is a “look through” provision where institutional investors can count those with a claim on their assets as individual investors, thus, enabling certain types of institutions (such as pension funds) to take a larger position than an individual investor.

Because of this unique feature of REITs, governance measures relying on takeover threats as a governance mechanism, such as antitakeover provisions (Bebchuk and Cohen 2005; Bebchuk et al. 2009; Gompers, et al. 2003), are unlikely to matter.

To further increase the uniformity of the REIT sample, we control for property sector since firms within the REIT industry have become more focused on single asset types over time.

Calls are typically only available on company websites for a limited time after the event, such as 90 days or one year.

http://www.businessinsider.com/john-paulson-totally-flipped-out-during-a-conference-call-today-2012-2

More recently, studies have shown that recent efforts to increase shareholder voice in governance have been beneficial (see Walkling and Cai 2011; Walkling et al. 2009). Only a handful of firms have changed their director election methods to allow more shareholder intervention during our sample period.

US Code §1104—Fiduciary duties.

See, for example, Jensen (1993), Yermack (1996), Coles et al. (2008), and Linck et al. (2008).

See, for example, Weisbach (1988), Brickley et al. (1994), and Coles et al. (2006).

It is also possible that very good executives (therefore not entrenched) also have long tenures. If this is true, these executives would probably want to show off their performance to shareholders. This possible argument only biases against us finding results consistent with our hypothesis.

To confirm the validity of liquidity as an instrument, in untabulated results we regress liquidity against institutional ownership and extract the residuals. We then include the “residual liquidity” that is orthogonal to institutional ownership in the second stage. The coefficient on the residual liquidity variable is insignificant in the second stage, which suggests that liquidity affects the incidence of conference calls only insofar as liquidity affects institutional ownership.

Results are not sensitive to variation in the number of firm performance controls used.

Here, we argue that the lag of conference call incidence affects the probability that the firm holds a conference call but not the conference call length. In untabulated results, we test whether the lag of conference call incidence is indeed unrelated to conference call length. In particular we regress the lag of conference call incidence against the incidence of conference calls and extract the residuals. We then include the “residual of lagged conference call incidence” that is orthogonal to the incidence of conference calls in our second stage. The coefficient on the residual lagged conference call incidence variable is insignificant, which suggests that the lagged conference call incidence affects the length of conference calls only insofar as lagged conference call incidence affects the incidence of conference calls.

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Titel: Governance, Conference Calls and CEO Compensation
verfasst von: S. McKay Price
Jesus M. Salas
C. F. Sirmans
Publikationsdatum: 01.02.2015
Verlag: Springer US
Erschienen in: The Journal of Real Estate Finance and Economics / Ausgabe 2/2015
Print ISSN: 0895-5638
Elektronische ISSN: 1573-045X
DOI: https://doi.org/10.1007/s11146-014-9457-0

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