Is alignemtn of
Risk or mispricing?
Rsk
Sizeeffect
12 month momentum (12 and -1) Mark kahart
Accruals anomaly – large portion in accrual scip underperforms
New securities: go long on co. That increae assets over a period of time and short on not you jedge.
His hypothesis:
Do managers overinvest and are they gambiling with investors monies
IF there is enough risk sharing between agents and owners there is no bad decision making
Mispricing: investors ignore relevant info so positive drift if over weigh value-relevant info then negative drift
His prescription is reducing costs by better specification of contract
Whether you are tailending the relative incentive.
Bonus- salary
Total compensation
Variables:
Short term: bonus –sal whole divided by total comp
Long term: granted – exercised by total comp
Lng term related to short term: equity and options – bonus whole divided by total comp
Total incentives : equity and options gratned + bonus the whole divided by total comp
Concur: higher sales and higher risk. Risk here means incentives bonus or time shifting.
Conflict: Means no risk. Good sales growth but compensation is fixed and there is no imposition of risk.
Long concur and short conflict
He ran monthly regressions on the hedge portfolio to see if there is an alpha...Can a portfolio manager act on this basis.... the first one has siginificant b1 so that is the only signifcant alpha.
Prmoter, group affiliation and earnings quality another paper
Promoter: after clause 49 earnings measure improves.
Gopalan and others: Business groups the cl 49 effect was bad. The earnings went down.
Difference between promoter problem and group problem: