Article Abstract:
A measure of diversification in a standard empirical model of executive compensation is used to analyze the effects of diversification on CEO compensation. The model examines the link between CEO compensation and firm diversification from 1985-1990. During this period, the CEO of a firm with two distinct lines of business, averages 13% more in salary and bonus compared with the CEO of an undiversified firm. The match of higher-ability CEOs with firms that are harder to operate and the association of diversification with CEO entrenchment are the reasons for such a compensation.
User Contributions:
Comment about this article or add new information about this topic:
Article Abstract:
Multibranch banks adopt automated teller machines (ATMs) earlier than those with fewer branches due to the network effect. Network effects show that the value of participating for each individual or firm increases as the network expands. In the case of ATM networks, a network's value for cardholders increases as the number of ATMs from which they can access their accounts increases. Banks with many branches are expected to adopt ATMs early since they are the ones likely to have bigger networks.
User Contributions:
Comment about this article or add new information about this topic:
Article Abstract:
An analysis of the manufacturer-retailer relationship for the gasoline service station industry ispresented. The analysis tests the principal-agent relationship based on microdata describing contractual forms, retail outlet chracteristics and retailprices for such stations. Results confirm the selection by firms of contracts with strong incentives. In addition, gasoline manufacturers consider direct control more vital than incentives when observable effort is given primary consideration.
User Contributions:
Comment about this article or add new information about this topic: