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Evaluating Form and Functionality of Pay-For-Performance Plans: The Relative Incentive and Sorting Effects of Merit Pay, Bonuses, and Long-Term Incentives
Get PDFUsing two-year longitudinal data from a large sample of US employees from a service-related organization, the present study investigates the relative effects of three forms of pay-for-performance plans on employees’ job performance (incentive effects) and voluntary turnover (sorting effects). The study differentiates between three forms of pay: merit pay, individual-based bonuses, and long-term incentives. By definition, these PFP plans have different structural elements that distinguish them from each other (i.e., pay plan form) and different characteristics (functionality), such as the degree to which pay and performance are linked and the size of the rewards, which can vary both within and across plan types. Our results provide evidence that merit raises have larger incentive and sorting effects than bonuses and long-term incentives in multi-PFP plan environments where the three PFP plans are operating simultaneously. Only merit pay has both incentive and sorting effects among the three PFP plans. The implications for the PFP-related theory, as well as for the design and implementation of PFP plans, are discussed
REIT Capital Structure Choices: Preparation Matters
Get PDFSun, Titman, and Twite (2015) find that capital structure risks, namely high leverage and a high share of short-term debt, reduced the cumulative total return of US REITs in the 2007-2009 financial crisis. We find that mitigating capital structure risks ahead of the crisis by reducing leverage and extending debt maturity in 2006, was associated with a significantly higher cumulative total return 2007-2009, after controlling for the levels of those variables at the start of the financial crisis. We further identify two systematic cross-sectional differences between those REITs that reduced capital structure risks prior to the financial crisis and those that did not: the exposure to capital structure risks and the strength of corporate governance. On balance, our findings are consistent with the interpretation of risk-reducing adjustments to capital structure ahead of the crisis as a component of managerial skill and discipline with significant implications for firm value during the crisis
The Economics of Commercial Real Estate Preleasing
No full textPreleasing of to-be-built commercial real estate space is a pervasive worldwide practice. Although such preleasing is an extensive and significant activity, it has not received adequate attention in the real estate economics and finance literature. Using an equilibrium micro-economic agency model, this paper examines the economics of commercial real estate preleasing. The equilibrium prelease contract rent is a function of several variables, including the expected spot market rent, financing benefits from preleasing, developer-lessor and tenant-lessee risk-hedging behavior, the interplay between lessor and lessee default options, and the market capitalization rate. Our paper demonstrates how the distribution of risk preferences for lessees (and lessors) generates separating market equilibrium for the prelease and spot lease. We also consider the impacts of developer default and the lessee cancellation clause on the prelease rent equilibrium
Determining the Applicability of 3D Concrete Construction (Contour Crafting) of Low Income Houses in Select Countries
Get PDFIn addition to showcasing the significance of 3D concrete printing technology, this report seeks to analyze what factors would inhibit, allow for, or facilitate Contour Crafting’s success in select countries. Saudi Arabia and China would be the optimal countries to introduce Contour Crafting based on our Excel-based model that controls for variables related to wealth, size, likelihood to consume, and concrete consumption per capita. Further research on country-specific regulation fosters the hypothesis that Contour Crafting is more likely to succeed in Saudi Arabia than in China. Contour Crafting’s global investing strategy will likely be through a joint venture partnership with governments via sovereign funds. Since capital partnerships seek to utilize the technology to supply low-income housing units, end users would not be able to afford the technology and would theoretically be funded by nations seeking solutions to underlying social issues impacting citizens. Overall feasibility is contingent upon government regulated housing, infrastructure, and cheaper alternatives of construction that provide adequate enclosure systems. Though Contour Crafting is a novel construction technique, it’s unlikely to be adopted as an economically feasible method for affordable housing construction
The Troubled Tower
Get PDF[Excerpt] Buildings are constructed for certain purposes, and the buildings of today are more practical, from the standpoint of the man who is in them than the older buildings. […] We are considering effort and convenience much more than appearance or effect. -Raymond Hood, architect of Rockefeller Center
Roark looked across the river at the shell of the unfinished building on an unusually cold April morning in Metropolis. The building, originally designed to be the signature property of an elite hotel company, sat partially finished on the south bank of the Metropolis River. As Roark looked at the building, questions raced through his mind: Was the unfinished building an opportunity or just a waiting nightmare? If his company purchased the building, how should it be completed and as what
An Examination of Customers’ Attitudes about Table Top Technology in Full-Service Restaurants
No full textThis paper examines the influence of customer-facing technology in full-service restaurants. As a new addition to the service experience, tabletop devices offer the customer more control over the dining experience, and also increase customer participation in the service process, which has the potential to upset the traditional exchange between service providers and customers in restaurants. To examine how customers react to the use of tabletop devices, this study examines 1,343 point-of-sales transactions from 20 units of a full-service casual dining restaurant chain and matches customer in-restaurant transactions to their reactions to tabletop devices used during their meals. Results show that over 70% of the customers who used tabletop devices reported positive affect toward the device, with approximately 79% of customers reporting that the device improved their experience, citing convenience, ease of use, and credit card security as some benefits of using the technology. Approximately 80% of the customers who used the device reported that they would return to the restaurant because of the positive affect. The results also indicate that likeability of the device and tip percentage were positively and significantly connected to customer reports of the devices having a positive effect on experience and on desire to return. In addition, when customers reported increased return intentions, likeability of the device was higher regardless of reports of the device improving restaurant experience, showing that the introduction of tabletop devices had a positive effect for most—but not all—customers
Fourth Quarter 2014: Ending 2014 in the Black: Introducing the SUP Performance Metric
Get PDFThe borrowing cost of debt financing continues to remain stable while equity financing continues to remain relatively cheap. We expect prices for large hotel properties to remain flat, but prices for small hotel properties to rise in the first quarter of the new year. We hope that operating performance as measured by EVA will finally become positive vis-à-vis an increase in the cap rate, assuming that total borrowing cost remains stable or it becomes cheaper to borrow debt or equity money. We also introduce a new performance metric, the standard unexpected price (SUP). This is report number 13 of the index series
It is Time for Something New: A 21st Century Joint-Employer Doctrine for 21st Century Franchising
No full text[Excerpt] The joint-employer doctrine is perhaps the hottest issue in labor and employment law for 2015 and the foreseeable future. In the September 2015 Browning-Ferris ( BFI”) decision, the National Labor Relations Board (the NLRB or the Board ), the administrative agency that enforces the National Labor Relations Act (the NLRA or the Act ), issued what is expected to be the first of two decisions, expanding the joint-employer doctrine. In the BFI decision, the so-called putative employer (e.g., the lessor of employees or a franchisor) is now considered the employer of individuals who had in the past been considered employees of the supplier employer. Like in Browning-Ferris, a number of McDonald\u27s employees and the Service Employees International Union ( SEIU ) are arguing that the world\u27s largest franchisor is the joint employer of all its franchisees\u27 employees. At first blush, one might believe that this is another esoteric labor and employment law issue that only lawyers and scholars care about. However, depending on how the Board and courts rule on this issue, the joint-employer doctrine could fundamentally change business in the United States by destroying the franchise model
Hotel Brand Conversions: What Works and What Doesn’t
No full textAs many as one-third of U.S. hotels have been converted from one brand to another in recent years, a process that frequently improves the hotel’s financial performance—although that is not always the case. Using data collected between 1994 and 2012 from PKF Hospitality Research, an analysis of brand conversions by 260 hotels shows that hotels moving downscale generally improved their occupancy, and thus their top-line revenue and profit ratios, compared to a control group of 2,750 hotels that did not change brands. However, hotels that moved upscale did not see notable changes in revenue or profit, nor did hotels that moved across their tier, especially when they stayed within their brand family. Two factors seem to drive the financial results for converted hotels—the relative strength of the brand and the fit between the brand and the property
Identity Tensions in Business-Based Brand Relationships
No full text[Excerpt] In this chapter, we explore the relationships that channel members have with the brands and companies they represent. We draw on ethnographic research to explore two primary identity tensions observed in one prominent form of distribution - franchising. We also provide some preliminary quantitative work in support of our qualitative findings. We posit that channel members seek relationship partners that reinforce one of four unique identity types and their associated values. Tensions arise between franchisees and their corporate partners when conflicting roles surrounding these two key dimensions of identity are imposed by the organization