INTRODUCTIONAgency problems are ubi

INTRODUCTION
Agency problems are ubiquitous in corporate finance literature and a continuous
concern for corporate America. Thus, compensation contracts for CEOs and corporate
managers are commonly designed to encourage these agents to act in the best interests of
shareholders. Interestingly, there is empirical evidence that compensation practices vary
across industries. For example, Ittner, Lambert, and Lacker (2003) document that the use
of stock options and restricted stock in high-tech, new-economy firms substantially
exceeds the equity compensation in large, old-economy manufacturing firms. Murphy
(2003) and Bryan and Hwang (2000) state that the use of managerial stock options is
extremely common, but options are used less frequently in highly regulated utility
industries. This implies that direct monitoring by regulators reduces the need for CEO
stock option awards.
Building on the results in Bryan and Hwang (2000), this dissertation focuses on
the highly regulated Real Estate Investment Trust (REIT) industry. In order to maintain
their federal tax-exempt status, REITs must meet several conditions. First, they must
distribute 90 percent of taxable income as dividends. Second, qualified REITs must have
at least 100 shareholders while adhering to the five or fewer rule, a prohibition against five or fewer shareholders owning 50 percent or more of the shares. Third, they must
have at least 75 percent of their assets invested in real estate oriented investments, cash,
and/or government securities. Finally, they must generate at least 75 percent of their
income from rent, mortgages, and the sale of property. Given the fact that they are highly
regulated financial firms yet pay substantial incentive-based compensation, REITs should
provide an interesting laboratory to investigate performance-based managerial
compensation.
For the purpose of this study, incentive-based compensation is defined as longterm
compensation including stock options, restricted stock, and long-term incentive plan
awards. It is different from equity based compensation because incentive-based
compensation includes long term incentive plans whose payoff is not necessarily equity.
For instance, long term incentive plans (LTIPs) include specific compensation once set
performance goals are attained for a period longer than one fiscal year from the date of
the award. The performance measure can be in terms of accounting ratios or equity
prices, and the actual payoff can be in cash, equity, or a combination thereof. Incentivebased
compensation is also different from performance-based compensation because
incentive-based compensation is forward-looking; thus, it refers to compensation
awarded to CEOs as incentive for long-term future executive performance.
In contrast to the large amount of research conducted on CEO compensation for
typical corporate firms and despite the growing usage of different incentive compensation
vehicles in CEOs compensation contracts, the topic of incentive based compensation has
yet to be fully examined in the context of REITs. There are many reasons for this void in
the real estate literature. Most notably, limitations on data availability may have led most
previous REIT studies to focus on cash and total compensation1 rather than on incentivebased
compensation, or even equity-based compensation.
This dissertation contributes to the literature by addressing three previously
unexplored topics in the REIT managerial compensation research. First, the relation
between incentive-based compensation and subsequent performance is determined. The
alignment of interest hypothesis states that managerial remuneration is a device used to
align the interests of shareholders and, thus, suggests a positive relation between
compensation and subsequent performance. By using panel-data econometric techniques
in balanced and unbalanced panel datasets for the period 1999-2003, it is tested the
impact of incentive-based compensation on one and three-year subsequent performance
as measured by ROA and stock returns.
Second, it is analyzed how various economic variables and monitoring
mechanisms impact the decision to pay incentive-based compensation using a logistic
fixed-effect regression methodology.
Third, the determinants of incentive-based compensation are examined. While the
determinants of total and cash compensation have been directly examined in the context
of REITs, the literature had not yet specifically examined what determines the level of
incentive-based compensation paid to REIT CEOs. Given the strict nature of the
regulatory requirements for firms that elect REIT status, it is reasonable to assume that these regulations affect REIT corporate governance mechanisms and thus affect the need
for and level of incentive-based compensation. For example, Campbell, Ghosh, and
Sirmans (2001) attribute the lack of hostile takeovers among REITs to their regulatory
environmen

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PENGENALANMasalah badan di mana-mana dalam sastra keuangan perusahaan dan terus-meneruskekhawatiran perusahaan Amerika. Dengan demikian, kompensasi kontrak bagi CEO dan korporasiManajer biasanya dirancang untuk mendorong agen ini untuk bertindak dalam kepentingan terbaikpemegang saham. Menariknya, ada bukti empiris bahwa praktek-praktek kompensasi bervariasidi industri. Sebagai contoh, Ittner, Lambert dan Lacker (2003) dokumen yang menggunakanopsi saham dan saham terbatas di berteknologi tinggi, ekonomi baru perusahaan secara substansialmelebihi kompensasi ekuitas di perusahaan-perusahaan manufaktur besar, tua-ekonomi. Murphy(2003) dan Bryan dan Hwang (2000) menyatakan bahwa penggunaan manajerial opsi sahamsangat umum, tetapi pilihan kurang sering digunakan dalam sangat diatur utilitasindustri. Ini berarti bahwa pengawasan langsung oleh regulator mengurangi kebutuhan untuk CEOPenghargaan opsi saham.Bangunan pada hasil di Bryan dan Hwang (2000), disertasi ini berfokus padaindustri Real Estate Investment Trust (REIT) yang sangat diregulasi. Untuk menjagastatus bebas pajak federal, REITs harus memenuhi beberapa persyaratan. Pertama, mereka harusmendistribusikan 90 persen dari penghasilan kena pajak sebagai dividen. Kedua, berkualitas REITs harusminimal 100 pemegang saham sementara mengikuti aturan lima atau lebih sedikit, larangan terhadap pemegang saham lima atau lebih sedikit, memiliki 50 persen atau lebih dari saham. Ketiga, mereka harusmemiliki minimal 75 persen dari aset mereka diinvestasikan dalam investasi real estat berorientasi, uang tunai,dan/atau surat utang negara. Akhirnya, mereka harus menghasilkan setidaknya 75 persen dari merekapendapatan dari sewa, hipotek dan penjualan properti. Mengingat fakta bahwa mereka sangatfirma-firma keuangan yang diatur belum membayar kompensasi berdasarkan insentif besar, harus REITsmenyediakan sebuah laboratorium yang menarik untuk menyelidiki berbasis kinerja manajerialkompensasi.Untuk studi ini, kompensasi berdasarkan insentif didefinisikan sebagai jangka panjangkompensasi termasuk opsi saham, saham terbatas dan rencana insentif jangka panjangpenghargaan. Hal ini berbeda dari ekuitas didasarkan kompensasi karena berbasis insentifkompensasi termasuk rencana insentif jangka panjang hasil yang ini tidak selalu berarti ekuitas.Misalnya, menetapkan jangka panjang rencana insentif (LTIPs) termasuk spesifik kompensasi sekalitujuan kinerja yang dicapai selama lebih dari satu tahun fiskal dari tanggalpenghargaan. Mengukur kinerja dapat rasio akuntansi atau ekuitasharga, dan hasil aktual dapat dalam bentuk tunai, ekuitas, atau kombinasi daripadanya. Incentivebasedkompensasi ini juga berbeda dari kompensasi berbasis kinerja karenakompensasi berdasarkan insentif memandang ke depan; dengan demikian, mengacu pada kompensasidiberikan kepada CEO sebagai insentif untuk jangka panjang masa depan kinerja eksekutif.Berbeda dengan jumlah besar penelitian CEO kompensasi atasperusahaan-perusahaan perusahaan yang khas dan meskipun meningkatnya penggunaan kompensasi insentif yang berbedakendaraan CEO kompensasi kontrak, topik insentif berbasis kompensasi telahNamun untuk sepenuhnya diteliti dalam konteks REITs. Ada banyak alasan untuk ini kekosongan dalamSastra real estat. Paling menonjol, batasan ketersediaan data mungkin telah menyebabkan sebagianStudi REIT sebelumnya untuk fokus pada uang dan total compensation1 daripada incentivebasedkompensasi, atau bahkan berdasarkan ekuitas kompensasi.Disertasi ini berkontribusi literatur dengan membahas tiga sebelumnyatopik yang belum dijelajahi dalam penelitian manajerial kompensasi REIT. Pertama, hubunganantara kompensasi berdasarkan insentif dan kinerja berikutnya ditentukan. Thepenyelarasan kepentingan hipotesis menyatakan bahwa manajerial remunerasi adalah alat yang digunakan untukmenyelaraskan kepentingan pemegang saham dan, dengan demikian, menunjukkan hubungan yang positif antarakompensasi dan kinerja berikutnya. Dengan menggunakan panel-data ekonometrik teknikdalam dataset seimbang dan tidak seimbang panel untuk periode 1999-2003, hal ini diujidampak dari kompensasi insentif berbasis pada satu dan tiga tahun berikutnya kinerjayang diukur oleh ROA dan pengembalian saham.Kedua, menganalisis bagaimana berbagai variabel ekonomi dan pemantauanmekanisme dampak keputusan untuk membayar kompensasi berdasarkan insentif yang menggunakan logistikEfek tetap regresi metodologi.Ketiga, faktor penentu kompensasi berdasarkan insentif diperiksa. Sementarafaktor-faktor penentu kompensasi total dan uang tunai langsung telah diteliti dalam konteksof REITs, the literature had not yet specifically examined what determines the level ofincentive-based compensation paid to REIT CEOs. Given the strict nature of theregulatory requirements for firms that elect REIT status, it is reasonable to assume that these regulations affect REIT corporate governance mechanisms and thus affect the needfor and level of incentive-based compensation. For example, Campbell, Ghosh, andSirmans (2001) attribute the lack of hostile takeovers among REITs to their regulatoryenvironmen