Executive remuneration in blockholder-dominated firms. How do Italian firms use stock options?

The aim of this study is to explore how stock options are used for executive remuneration in blockholder-dominated listed firms. By analysing how stock options granted to executive directors were designed, this paper sheds light on how stock options are used in Italian blockholder-dominated listed firms. Empirical evidence from a unique hand-collected dataset comprising stock options granted by Italian non-financial listed firms between 2004 and 2006 suggests that stock option design seems to be better explained by rent-extraction theory than by optimal contracting theory. Our results suggest that board independence, particularly in terms of minority shareholders?? representation, seems to have a positive influence on stock option design. These findings are consistent with rent-extraction theory: stock option designs that are not explained by optimal-contracting theory are likely to reflect governance/agency problems. This study provides insights on executive remuneration to policy-makers. It is recommended that codes of best practice should stress the importance of stock option design and of remuneration committees?? independence, in particular in terms of minority shareholders?? representation. Last but not least, this study points out the importance of enforcing substantial compliance with the codes?? recommendations.     

How much is too much: Does the size of income support transfers affect labor supply?

Cash transfer programs pursue mainly protective objectives, but can also impact rural livelihoods by inducing investments in productive activities and changing household labor allocation. We adopt a continuous treatment approach to quantify how households’ labor supply responds to transfer size. We find a shift from paid labor to own farm labor and find that the transfer size is well within a level that would have disincentive effects on time spent on own farm activities. The switch from paid to own farm labor occurs at lower levels of transfers for labor-constrained households, and at higher levels for non-labor constrained households.     

Does accounting regulation enhance corporate governance? Evidence from the disclosure of share-based remuneration

Accounting for stock options and share-based remuneration is a controversial issue. The purpose of this study is to explore the impact of the mandatory adoption of IFRS 2 on accounting for share-based remuneration by Italian listed companies. The requirements under this standard could have relevant implications for corporate governance as IFRS 2 is expected to reduce the information asymmetry that may exist between corporate insiders and outsiders regarding such remuneration. Empirical evidence confirms that overall disclosure in annual reports concerning the costs of remuneration plans has increased following the adoption of IFRS 2, although some cases of lack of disclosure have also been found. We find that this change in accounting regulation has contributed towards revealing the ‘true’ cost of share-based remuneration to minority shareholders and other investors, together with some evidence of creative accounting surrounding the substance over form principle.     

Patents,R&D investments and post-IPO strategies

This paper empirically investigates the effect of going public on the evolution of high-tech entrepreneurial firms, focussing in particular on the interaction between innovation variables and financing and investment strategies. Specifically, I confront the effects of the IPO on firms with higher R&D investments versus firms with more patents. Firms with higher R&D investments typically view the IPO as a mechanism to raise external equity, used to pursue investments and to acquire participation in other companies, whereas those with more patents raise more debt capital and invest less after the IPO, as compared to high-tech entrepreneurial firms. I suggest that a large number of patents is an index of technological maturity for high-tech ventures, even more than age and size, that helps investors to individuate firms with a lower level of risk.     

Combining Quantitative and Qualitative Measures of Uncertainty in Model-Based Environmental Assessment: The NUSAP System

This article discusses recent experiences with the Numeral Unit Spread Assessment Pedigree (NUSAP) system for multidimensional uncertainty assessment, based on four case studies that vary in complexity. We show that the NUSAP method is applicable not only to relatively simple calculation schemes but also to complex models in a meaningful way and that NUSAP is useful to assess not only parameter uncertainty but also (model) assumptions. A diagnostic diagram can be used to synthesize results of quantitative analysis of parameter sensitivity and qualitative review (pedigree analysis) of parameter strength. It provides an analytic tool to prioritize uncertainties according to quantitative and qualitative insights in the limitations of available knowledge. We show that extension of the pedigree scheme to include societal dimensions of uncertainty, such as problem framing and value-laden assumptions, further promotes reflexivity and collective learning. When used in a deliberative setting, NUSAP pedigree assessment has the potential to foster a deeper social debate and a negotiated management of complex environmental problems.     

The institutional challenges of participatory communication in international aid

This article offers an explanation for the limited uses of participatory communication in development by taking an institutionalist perspective that examines prevalent notions about communication and organizational uses in international aid institutions. The argument is that institutional goals and dynamics determine the use of disciplinary and theoretical approaches. The selection of specific communication approaches is not primarily based on their analytical or normative value, but rather, on institutional factors and expectations. Institutional dynamics undercut the potential contributions of participatory communication in three ways. First, bureaucratic requirements favor the use of informational models over participatory approaches to communication. Standard institutional procedures inside development agencies, donors and governments perpetuate understandings and uses of communication as a set of technical skills to disseminate messages. Second, the weak status of communication as a field of study and practice in development organizations undermine the prospects for expanding the understanding of communication that do not fit prevalent institutional expectations. As long as technical experts in public health or other fields expect communication to be ‘the art of messaging,’ communication staff lacks autonomy to make decisions and incorporate participatory approaches. Third, the institutional predominance of a technical mindset also limits the uses of participation thinking. The prioritization of technical perspectives decouples ‘development’ programs from local processes of participation and change.