Equity Incentives and Long-Term Value Created by SG&A Expenditure

• 成果类型: Article
• 署名作者: Banker, Rajiv D.; Huang, Rong; Natarajan, Ramachandran
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University; City University of New York (CUNY) System; Baruch College (CUNY); University of Texas System; University of Texas Dallas
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/j.1911-3846.2011.01066.x
• 发表日期: 2011
• 页码: 794-+
• 关键词: investment opportunity set; executive-compensation; information-technology; managerial incentives; corporate-investment; Fundamental analysis; ADDITIONAL EVIDENCE; AGENCY COSTS; cash flow; performance

摘要

In this paper we investigate how incentives affect managers' input resource expenditure decisions and how firms make equity grant decisions considering managerial behavior. Focusing on selling, general, and administrative (SG&A) expenditure, we first document that SG&A expenditure creates future value that varies across firms and industries. We hypothesize and find that new equity incentives lead to an increase in SG&A expenditure in companies where SG&A creates a high future value. The extent to which long-term incentives impact managers' expenditure decisions depends on the future value created by SG&A expenditure. We also find that firms with high level of SG&A spending grant more new equity incentives when SG&A creates more future value. The evidence is consistent both with managers making rational investment decisions in response to new equity incentives and with firms making efficient grant decisions based on managers' expected behavior. Overall, this study documents the importance of considering the future value created by input resource expenditure in examining the association between equity incentives and managerial spending behavior.