Corporate Characteristics and Influence on Share Based Payment of Financial Service Firms in Nigeria

Davies Stanley Diepiriye; Lucky Anyike Lucky

doi:10.46281/asfbr.v2i1.8

Davies Stanley Diepiriye Department of Accountancy, Ken Saro-Wiwa Polytechnic, Bori, Rivers State, Nigeria
Lucky Anyike Lucky Department of Banking and Finance, Rivers State University, Nkpolu Orowurokwo, Port Harcourt,Rivers State, Nigeria

DOI: https://doi.org/10.46281/asfbr.v2i1.8

Keywords: Share Base Payment, Corporate Characteristics, Financial Service Firms, Agency Theory, Corporate Payout Policy.

Abstract

This investigates the effect of corporate characteristics on share base payment of financial service industry in Nigeria. Objective of the study is to if internal factors affects share base payments of corporate organizations in Nigeria. We analyzed five commercial banks and five insurance firms that are quoted on the floor of Nigerian Stock Exchange. Technique adopted for sampling adopted is convenience sampling. As the nature of data is panel therefore, pooled regression, fixed and random effect tests are run. Random effect results are focused after applying Hausman’s test. From the fixed effect model, tangibility, risk, management efficiency, debt equity ratio, corporate governance and cost of capital have negative but insignificant effects while return on investment, liquidity and firm size have positive and insignificant effect on share base payment. We conclude that corporate characteristics does not significantly influence share base payment of the selected financial service firms. We therefore recommend that the use of share base payment should be integrated with the corporate structure such as ownership structure, capital structure and others.

References

Alexander et al. (2007). International Financial Reporting and Analysis. 3rd edition.

Anderson, R. C., Duru, A., & Reeb, D. M. (2009). Founders, heirs, and corporate opacity in the United States. Journal of Financial Economics, 92(2), 205–222.

Ayers, B., & Freeman, R. (2003). Evidence that analyst following and institutional ownership accelerate the pricing of future earnings. Review of Accounting Studies, 8(1), 47–67.

Atanasova, C., (2007) Access to institutional finance and the use of trade credit. Financial Management 36(1), 49-67.

Baik, B. O. K., Farber, D. B., & Lee, S. A. M. (2011). CEO ability and management earnings forecasts. Contemporary Accounting Research, 28(5), 1645–1668.

Baker, T., Collins, D., & Reitenga, A., (2003). Stock option compensation and earnings management incentives. Journal of Accounting, Auditing and Finance 18(4), 557-582.

Baker, T. A, Collins, D. L., & Reitenga, A. L .,(2009). Incentives and opportunities to manage earnings around option grants. Contemporary Accounting Research 26(3), 249-272.

Barry, C., & Brown, S. (1985). Differential information and security market equilibrium. Journal of Financial and Quantitative Analysis, 20, 407–422.

Benson, B.W., & Davidson, W. N., (2009) .Reexamining the managerial ownership effect on firm value. Journal of Corporate Finance 15(5), 573-586.

Berle, A. A & Means, G. C., (1932). The Modern Corporation and private property. New York: Macmillan.

Bettis, J.C, Bizjak, J. M., & Lemmon, M. L., (2005). Exercise behavior, valuation, and the incentive effects of employee stock options. Journal of Financial Economics 76(2), 445-470.

Blasi et al. (1996). Employee Stock Ownership and Corporate Performance among Public Companies. Industrial and Labor Relations. 50(1), 412-438.

Brav, A, Graham, J.R, Harvey, C.R .,& Michaely, R., (2005). Payout policy in the 21st century. Journal of Financial Economics 77(3), 483-527.

Brockman, P, Martin, X., & Unlu, E., (2010). Executive compensation and the maturity structure of corporate debt. The Journal of Finance 65(3), 1123-1161.

Chakraborty, A., Sheikh, S., & Subramanian, N., (2007) .Termination risk and managerial risk taking. Journal of Corporate Finance 13(1), 170-188.

Chava, S., & Purnanandam, A., (2010) CEOs versus CFOs: Incentives and corporate policies. Journal of Accounting and Economics 97(2), 263-278.

Cheng , W., & Warfield, R.T., (2005). Equity Incentives and Earnings Management. Accounting Review, 80 (2), 441-476, 36

Coles, J. L, Daniel, N. D., & Naveen, L., (2006). Managerial incentives and risk-taking. Journal of Financial Economics 79(2), 431-468.

Core, J. E., and Guay, W.R. (2001). Stock option plans for non-executive Employees. Journal of Financial Economics, 253–287.

Cuny, C. J., Martin, G. S., & Puthenpurackal, J. J., (2009). Stock options and total payout. Journal of Financial and Quantitative Analysis 44(2), 391-410.

Dechow, P. M., Kothari, S. P., & Watts, R. L. (1998). The relation between earnings and cash flows. Journal of Accounting and Economics, 25(2), 133–168.

Diamond, D., & Verrecchia, R. (1991). Disclosure, liquidity, and the cost of capital. Journal of Finance, 46, 1325–1360.

Deegan, C., & Unerman, J., (2006). Financial Accounting Theory. McGraw Hill Education, London.

Demsetz, H., & Lehn, K., (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy 93(6),1155-1177.

Denis, D. J & Xu, J ., (2013) .Insider trading restrictions and top executive compensation. Journal of Accounting and Economics 56(1), 91-112.

Dikolli, S. S., Kulp, S. L., & Sedatole, K. L. (2009). Transient institutional ownership and CEO contracting. The Accounting Review, 84(3), 737–770.

Duncan, W.J (2001). Stock Ownership and Work Motivation. Organizational Dynamics. 30(1), 1-23.

Fahlenbrach, R., & Stulz, R.M., (2009). Managerial ownership dynamics and firm value. Journal of Financial Economics 92(3), 342-361.

Faulkender, M., Kadyrzhanova, D., Prabhala, N., Senbet, L., (2010). Executive Compensation: An Overview of Research on Corporate Practices and Proposed Reforms. Journal of Applied Corporate Finance,22(12), 54-87.

Fenn, G. W., & Liang, N., (2001). Corporate payout policy and managerial stock incentives. Journal of Financial Economics 60(1), 45-72.

Frydman, C., & Saks, R. E. (2010). Executive compensation: A new view from a long-term perspective, 1936–2005. Review of Financial Studies, 23(5), 2099–2138.

Guay, W. R., (1999). The sensitivity of CEO wealth to equity risk: an analysis of the magnitude and determinants. Journal of Financial Economics 53(1), 43-71.

Hall, B. J., & Liebman, J. B., (1998). Are CEOs really paid like bureaucrats? The Quarterly Journal of Economics 113(3), 653-691.

Hayes, R. M, Lemmon, M., & Qiu, M., (2012). Stock options and managerial incentives for risk taking: Evidence from FAS 123R. Journal of Financial Economics 105(1), 174-190.

Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1–3), 405–440.

Himmelberg, C. P, Hubbard , R. G., & Palia, D. (1999). Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Economics 53(3), 353-384.

Jensen , M.C., & Murphy, W., (1990). CEO incentives- It is not how much you pay, but how. Journal of Applied Corporate Finance, 22 (1), 64-76.

Jensen, M. C & Meckling, W. H., (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3(4), 305-360.

Jensen, M. C., (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review 76(2), 323-329.

Johnston, D. (2006). Managing stock option expense: The manipulation of option-pricing model assumptions. Contemporary Accounting Research 23(2), 395-425.

Kahle , K.M., (2002). When a buy back isn’t a buyback: open market repurchases and employee options. Journal of Financial Economics 63(2), 235-261.

Knopf, J.D., Nam, J., & Thornton , Jr, J. H. (2002). The volatility and price sensitivities of managerial stock option portfolios and corporate hedging. The Journal of Finance 57(2), 801-813.

Lewellen, K., (2006) .Financing decisions when managers are risk averse. Journal of Financial Economics 82(3),551-589.

Low, A. (2009). Managerial risk-taking behavior and equity-based compensation. Journal of Financial Economics 92(3), 470-490.

McConnell, J.J, Servaes, H., & Lins, K. V., (2008). Changes in insider ownership and changes in the market value of the firm. Journal of Corporate Finance 14(2), 92-106.

Milgrom, P. R., & Roberts, J., (1992). Economics, organization and management, Prentice-Hall Englewood Cliffs, NJ.

Nagar, V., Nanda, D., & Wysocki, P. (2003). Discretionary disclosure and stock-based incentives. Journal of Accounting and Economics, 34, 283–309.

Noe, C. F. (1999). Voluntary disclosures and insider transactions. Journal of Accounting and Economics, 27(3), 305–326.

Peng and Röell (2008). Manipulation and Equity-Based Compensation. American Economic. 98 (2),285-290.

Rego, S. O., & Wilson, R., (2012). Equity risk incentives and corporate tax aggressiveness. Journal of Accounting Research 50(3), 775-810.

Rogers, D. A., (2002). Does executive portfolio structure affect risk management? CEO risktaking incentives and corporate derivatives usage. Journal of Banking & Finance 26(2–3), 271-295.

Ross, S. A. (2004). Compensation, incentives, and the duality of risk aversion and riskiness. The Journal of Finance 59(1), 207-225.

Smith, C., & Stulz , R., (1985). The determinants of firms' hedging policies. Journal of Financial and Quantitative Analysis 20(4), 391-405.

Yermack, D., (1997). Good Timing: CEO Stock Option Awards and Company News Announcements. Journal of Finance,30(2), 401-423.

Zhou, X .,(2001). Understanding the determinants of managerial ownership and the link between ownership and performance: Comment. Journal of Financial Economics 62(3), 559-571.