This article examines how CEO compensation structure and CEO gender were associated with corporate social responsibility (CSR) performance in U.S. firms in the period between 2003 and 2013. Building on prior research in economics, finance, accounting, and management, which suggests gender differences in commitment to CSR, this study provides empirical evidence that female CEOs were positively associated with higher CSR performance. The analysis further shows that a higher proportion of equity in CEO compensation was positively associated with CSR, whereas higher proportions of cash bonuses and long-term incentive plans were negatively associated with CSR. Notably, a higher proportion of a cash bonus in CEO compensation further reduced CSR in firms led by female CEOs. These findings offer valuable insights for firms seeking to design executive compensation packages that align CEO behavior with the firms’ CSR objectives. This study contributes to the growing body of literature on CSR by providing empirical evidence on the role of CEO gender and compensation structure.

This work explores the link between CEO turnover patterns and firms’ climate change exposure in a data set of over two thousand U.S. publicly traded firms. The findings demonstrate that CEO turnover is negatively associated with measures of climate change exposure developed with machine learning based on the frequency of discussions linked to climate change in the firms’ earnings conference calls. The results further indicate that this significant negative relationship exists in the year after the CEO’s departure from the firm, not before their departure. CEO turnover scenarios differ in their impact on a firm’s climate change exposure and sentiment. The focus of a firm’s management and financial analysts covering the firm can shift away from the issues of climate change. The negative and significant relationship with firms’ climate change exposure is observed particularly for forced CEO departures in firings or resignations, as well as for outsider CEO replacements. No significant relationship is found for CEO departures due to retirement or for cases of internal CEO succession. The results provide insights for decision makers, investors and boards of directors trying to evaluate the role of CEO turnover in climate change exposure at firms.

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This article investigates the relationship between the decision-making bias known as escalation of commitment and the turnover of non-CEO executives in top management teams. The phenomenon of escalation of commitment is observed when decision makers persist with business investments that have a low likelihood of success. Theoretical explanations for the association between executive turnover and escalation include self-justification and reputation protection. Top managers may conceal prior errors, escalate commitment to earlier decisions, and exit the organization before the outcome of decisions is observed. Successor managers do not have a commitment to earlier decisions and have the capability to stop investments that are discovered to be failing. Empirical analysis utilizing a sample of over 1600 U.S. firms confirms that departures by non-CEO executives from top management teams are associated with an increased likelihood of new reporting of discontinued operations and extraordinary items by firms and a reduction in the firms’ performances relative to their industry. These effects reflect de-escalation activities and are amplified in the years concurrent with and following a joint departure of multiple management team members. Prior empirical studies on escalation and de-escalation behavior focused on CEO turnover. The contribution of this article is its documenting of the key role of non-CEO managers and team turnover in the context of escalation.

This data article describes a dataset of US CEO turnover types created with manual data collection through searches of news stories related to CEO turnover. The data identify the fiscal year of turnover and its type for top managers in publicly-traded US firms. Researchers in economics, finance and accounting explore the role of CEO turnover in various settings, however data on the timing and type of CEO departures are not always reliably available. We identify turnover cases based on changes in the CEO of the firm as recorded in secondary data sources of Compustat and Execucomp, and then we classify turnover types based on the examination of full-text news. By including data on company and executive identifiers, this dataset may be merged with existing finance and accounting databases and used in future research on a variety of topics. The data includes 3,100 US publicly-traded firms and may be used in both cross-sectional and longitudinal analyses.

In this study, we examine the three components of executive compensation including salary, equity, and bonus pay over a CEO’s tenure for US publicly-traded firms. We confirm a positive and significant relationship between two separate measures of firm performance and incentive pay. We also identify significant differences between equity and bonus incentive compensation. We find that variables indicative of an increase in the likelihood of anticipated CEO turnover are associated with greater sensitivity of bonus compensation to changes in firm performance. Specifically, this pay-performance link is enhanced for CEOs who reach retirement age. Further, the sensitivity of bonus pay to firm performance is significantly greater when there is planned CEO turnover within a two-year window. We find no similar changes in pay-performance sensitivity for equity-based compensation or salary. These findings suggest that when a CEO’s departure is anticipated, firms increase bonus pay incentives for a CEO’s effort based on the firm’s concurrent performance to compensate for the reduction in the incentives that rely on the executive being employed long-term. The results provide a rationale for including bonus pay in the overall executive compensation package.

Purpose This study aims to examine the relationship between corporate social responsibility (CSR) and measures of financial reporting quality. Design/methodology/approach The authors explore the link between CSR and several indicators of firms’ financial reporting quality. Estimation with firm and year fixed effects is based on a sample of US publicly traded firms covering the period from 1991 to 2018. Findings Empirical results demonstrate that firms with higher CSR scores are associated with higher accuracy of financial forecasts, fewer earnings surprises and greater coverage by financial analysts. This positive relationship is more profound for firms that face low agency concerns, firms that have a higher level of customer awareness, firms that have more long-term institutional ownership or firms that do not face financial constraints. Originality/value The study contributes to the ongoing debate on the value of CSR. The results support the stakeholder value maximization view of CSR and identify the impact of several factors on its relationship with the quality of financial reporting.

This study explores whether the sensitivity of CEO compensation to changes in firm performance depends on the CEO's likelihood of leaving the position. In a sample of 3180 US publicly-traded firms, we find that the sensitivity of bonus pay to firm performance is enhanced for a CEO who has reached retirement age. Further, we find that the sensitivity of bonus pay to firm performance is greater when there is evidence of a planned CEO turnover within a two-year window. We show that these findings are consistent with a principal-agent model in which firms who anticipate a greater likelihood of CEO departure find it advantageous to enhance the link between bonus pay and concurrent performance measures to compensate for the lowering of incentives that rely on the manager being employed long-term. The results provide a rationale for including bonus pay in the overall executive compensation package.

This study examines the relationship between corporate social responsibility (CSR) and different types of CEO turnover. Our findings based on a sample of over 2,500 publicly-traded US firms clarify how firms’ CSR engagement relates to CEO turnover by reason and source of new CEO. Firms with higher CSR scores are positively associated with the firing of CEOs and negatively associated with normal retirements. Low CSR firms are more likely to experience contender successions that indicate a power struggle within the firm’s management. This relationship becomes stronger when other members of the top management team leave a firm at the time of CEO turnover. These results suggest that CSR measures serve as an indicator of good corporate governance.

We present a modified principal-agent model to identify a link between the anticipated likelihood of future CEO turnover and the optimal sensitivity of incentive pay to firm performance. The analysis focuses on the optimal sequence of standard one-period incentive contracts when CEO effort choices have lasting effects on firm performance. In such a model, an increase in the anticipated likelihood of turnover reduces the impact of future incentive contracts on current CEO effort, and induces a compensatory increase in the optimal sensitivity of current CEO compensation to current firm performance. We find empirical evidence in support of this prediction for a sample of over 3,000 US firms. Using an executive-specific fixed effects model, we find that among CEOs who depart within two years, the sensitivity of current incentive pay to changes in current firm performance is greater when there is a higher anticipated likelihood of CEO turnover as proxied by departures that reflect a planned succession and departures by CEOs who have reached retirement age. As expected, this increase in the sensitivity of current incentive pay to changes in firm performance is not found if the subsequent turnover is classified as unplanned, and thus not anticipated by the firm. JEL Classification: G30, J33, J63, M12, M52

The escalation of commitment process involves a decision-maker continuing commitment to an investment after receiving negative information. This study develops a principal-agent model to explore how escalation decisions are linked with departures of CEOs from the position. With asymmetric information, a CEO has an incentive to conceal prior decision errors by escalating commitment to failing investments and leaving the firm before the outcome of investment decisions is disclosed publicly. Results of empirical analysis based on a sample of over 3,000 US firms are consistent with the theory and demonstrate that firms’ reporting of low financial performance relative to their industry as well as initiation of new discontinued operations are preceded, and not followed, by unplanned CEO departures.

Finance education relies on quantitative analyses and exercises. Lack of quantitative skills undermines student motivation. Interactive teaching methods including case-based learning, problem-based learning, and simulations have been proposed as means to improve student engagement and enhance learning. This study describes an application of a sequence of stock market simulation exercises in a finance investment course. The empirical analysis applies a model of the educational value of this pedagogical strategy to evaluate its impact on cognitive, behavioural, and affective learning dimensions. The results demonstrate that, in the cognitive category, student exam scores on the topics covered by the simulation were significantly higher compared to a control section that did not use the simulation. In the behavioural category that concerns student skills and the affective category that focuses on student satisfaction, survey responses demonstrate a positive impact of the use of simulation on skill-building and satisfaction with the course.

Theoretical basis This descriptive case study applies economic concepts to an issue of public policy, and helps build students’ critical thinking, analytical and quantitative skills. The case addresses a variety of topics typically taught in microeconomics and public economics courses. Topics most prominently represented in the case include elasticity of demand and supply, tax policy, tax incidence and negative externalities. Theoretical basis for each topic is laid out in the discussion section of the instructors’ manual, along with insights from student responses. The core nature of the concepts covered in this case study allows it to be integrated with common economics textbooks. Research methodology This descriptive case is based on critical economic analysis of secondary sources. Case overview/synopsis This case study focuses on the imposition of the controversial “soda tax” on sweetened beverages in the City of Philadelphia in 2017 and considers the economic lessons that can be learned from Philadelphia’s experience with the tax. The tax was proposed as a way to raise the city’s revenue while reducing obesity. After the tax was enacted, the sales of sweetened beverages declined in the city, but increased outside the city’s borders. The receipts from the tax have been below projections. Complexity/academic level Learning outcomes covered by the case are typical for a microeconomics, public economics or managerial economics course. The appropriate course levels range from the principles to the MBA level of the economics and business curriculum. Discussion questions may be selected to fit a specific course focus and level. The instructors’ manual outlines question sets suitable for various types of economics courses.

Managerial decisions on the adoption of innovative technologies by a firm are made under conditions of uncertainty and must account for network externalities that imply the benefit of a technology is received not only from its intrinsic payoff, but also from the size of the network of other adopters. The theoretical model presented in this study demonstrates that for firms evaluating information technology investment with network effects key determinants of the technology selection pattern are adoption reversibility and switching costs. If switching costs are sufficiently high to make technology adoption irreversible then safer established technologies have an advantage as choosing a riskier untested technology opens the firm to the risk of being stranded without a network of followers. With lower switching costs, the technology adoption decision is reversible which provides an advantage to riskier untested technologies. A discussion of empirical evidence on adoption patterns in information technology provides application for the theoretical model.

We explore how de-escalation of commitment is linked to top management turnover and economic changes at the firm. Escalation of commitment occurs when managers continue investment in a project after receiving negative information. A major determinant of escalation is the personal responsibility effect in that managers are more likely to escalate commitment to a failing project if they were responsible for the original investments. Prior studies suggest that a change in top management facilitates de-escalation of commitment as incoming managers who do not have such commitment are able to stop investments that are discovered to be failing. Our empirical analysis based on a sample of over 3,300 firms for the period from 1992 to 2016 demonstrates the link between specific top management turnover types and economic changes at the firm consistent with the de-escalation of commitment.

Purpose - This study aims to explore the challenges that the escalation of commitment poses to information security. Design/methodology/approach - Two distinct scenarios of escalation behavior are presented based on literature review. Psychological, organizational and economic theories on escalation of commitment are reviewed and applied to the area of information security. Findings - Escalation of commitment involves continuation of a course of action after receiving negative information about it. In the information security compliance context, escalation affects a firm when an employee decides to break the firm's information security policy to complete a failing task. In the information security investment context, escalation occurs if a manager continues investment in policies and solutions that are ineffective because of psychological, organizational or economic factors. Both of these types of escalation may be prevented with de-escalation techniques including a change in management or rotation of duties, monitoring, auditing and governance mechanisms. Practical implications - Implications of escalation of commitment behavior for information security decision-makers and for future research are discussed. Originality/value - This study complements the literature by establishing the context of escalation of commitment in decisions related to information security and reviewing managerial and economic theories on escalation of commitment.

ABSTRACT Escalation of commitment is a decision error that has been linked to investment failures in information technology projects. This study explores escalation of commitment scenarios in the management of information security. Factors that prevent and stop escalation of commitment include monitoring of decision makers, changes in management, regular appraisals, setting public targets and spending limits. This study adds to the literature by establishing the context of information security decisions that experience escalation behavior and reviewing theories of escalation grounded in both management and economics. In order to be effective, de-escalation mechanisms must address these theories and factors that promote escalation of commitment in decisions related to information security. Keywords Escalation of Commitment, Information Security, Management Information Systems

CASE BODY The pay-TV industry faces a revolution both in US and world-wide. On one hand, popularity of pay-TV programming is at an all-time high as pay-TV networks such as HBO and Showtime invest in lavishly produced programming that is well-received by both viewers and critics. Traditional pay-TV providers, which include cable and satellite TV companies, reach over 130 million households in US and an average household spends seven hours a day watching TV (FCC, 2013). On other hand, consumers who have long been at mercy of cable and satellite TV providers are now finding a variety of new ways to get their favorite TV content. New entrants in pay-TV market including Netflix and Amazon provide alternatives to traditional cable TV at a significantly lower cost. More consumers choose to cord and receive their video programming on demand from a free or a paid subscription service. Some industry observers have even proclaimed the death of TV as we know (Yarow, 2015). The rising price of traditional pay-TV offerings is noticed by consumers and regulators alike. According to Federal Communications Commission (2014), average cost of a monthly expanded basic cable subscription rose from $27.88 in 1998 to $64.41 in 2013. A separate research report from NPD Group states that average cable TV monthly bill in U.S. rose from $40 in 2001 to $86 in 2011, and is projected to rise to $123 per month in 2015 (Kritsonis, 2013). Figure 1 compares growth in price of cable TV and inflation rate measured by Consumer Price Index. Over this period, cable TV prices have been rising at four times rate of general inflation. As prices of traditional pay-TV access continue to increase, there is an emerging narrative suggesting that best way to cut those bills down and encourage more competition from providers is to offer consumers opportunity to select individual channels they purchase. This is known as pricing. Recently, Republican Senator John McCain and Democratic Senator Richard Blumenthal sponsored a bill that would require pay-TV operators to offer a-la-carte pricing. McCain asserts that special interest groups have stacked regulatory deck in favor of preserving an outdated business model and advocates benefits of a-la-carte selection of channels (Kritsonis, 2013). In Canada, broadcasters are now required to offer a low cost base package of local and educational channels to consumers. Beyond base service, Canadians are now able to subscribe to individual channels or small bundles of channels that, by law, must be reasonably priced. The Canadian system came to be known as pick and pay. (Lazarus, 2015) This push to a-la-carte pricing represents a major departure from traditional pricing in pay-TV. For many years, pay-TV market in US has been dominated by providers bundling individual channels they offer into packages. Despite increases in number of channels offered to consumers in these bundles, a typical consumer only chooses to watch a few channels on a regular basis. Figure 2 shows number of channels received and watched in an average TV household. In 2013, a typical consumer watched only 17 channels out of 189 available in programming bundle. While bundling is common in many product markets--with McDonald's Happy Meals and Microsoft Office software suite providing two of better-known examples--it has become pervasive in pay-TV industry. Most consumers see no other option but to purchase their TV channels in a bundle. Bundling may help firm realize economies of scale and economies of scope in product delivery. Proponents of bundling suggest that it is essential for survival of niche channels that cater to specific interests or minorities and will not have sufficient support to be offered in a-la-carte environment. Critics of bundling claim that it forces consumers to buy channels that they never watch. …