Executive Compensations to Address Agency Problems and the Income Strategy Impact

The general acceptance of the agency theory and the parallel research on executive compensation began in the early 1980s.

It was the evolution of the modern corporation with ownership separation and control that undermined the agency theory. Early studies in this area focused on documenting the relation between CEO pay and firm performance. The discussion of executive compensation must proceed with the fundamental agency problem afflicting management decision-making as background. According to Jensen and Murphy (1990), there is an optimal contracting approach, which is when boards use design compensation schemes to maximize shareholder value with efficient incentives (Jensen and Murphy 1990). Continue reading

Acquisition Values and Optimal Financial (In)Flexibility

According to conventional wisdom, the deep pockets of an incumbent serve to deter entry. In large part, the theoretical basis for this view rests upon the model of Bolton and Scharfstein (1990), who show that an unconstrained cashrich incumbent can fund predation in order to increase the likelihood of venture capitalists terminating projects. Continue reading

A Financing-Based Misvaluation Factor and the Cross-Section of Expected Returns

Several recent behavioral models predict commonality in the misvaluation of firms. In the style investing approach of Barberis and Shleifer (2003), commonality in misvaluation arises when irrational investor enthusiasm for stock characteristics shifts, inducing positive comovement among stocks with similar characteristics and negative comovement in stocks with dissimilar characteristics. Continue reading

Future Distruptive Technologies

Future Distruptive Techlogies

Future Distruptive Techlogies

The cloud storms as a disruptive force

The cloud in its various forms (SaaS, IaaS and PaaS) trumps all market sectors by a wide margin in this two-part question. Slightly more than half (56 percent) predict that these cloud services will lead consumer technology change and shake up business the most (55 percent). Moreover, software as a service dwarfed the two other cloud-computing categories (infrastructure and platforms), with 30 percent singling out SaaS on the consumer side and 21 percent for business.Continue reading

Disruptive technologies: Advances that will transform life, business, and the global economy

Distruptive technology

Distruptive technology

Technological progress is not the only force that drives transformative growth in economies; for example, US growth during the 1970s was driven by the entry of millions of women and baby boomers into the labor force. However, technological advances have been an especially valuable source of growth because they tend to be “non-rival” in nature, meaning they can be used over and over, benefiting different users and driving increasing returns. And unlike other sources of growth, such as increases in the labor force, the effects of technology do not go away.Continue reading