Executive compensation has risen dramatically beyond the rising levels of an ave

Question

Executive compensation has risen dramatically beyond the rising levels of an average worker’s wage over the years. This has been a hot topic for discussion, especially with the crisis in the financial sector and the controversy over the federal bailout. The government is even considering a cap on highflying salaries for executives (New York Times, February 9, 2009). Consider the following data, which link total compensation of the 455 highest-paid CEOs in 2006 with two performance measures (industry-adjusted return on assets (Adj ROA) and industry-adjusted stock return (Adj Stock Return)) and the firm’s size (Total Assets). The data, labeled Executive Compensation, are available on the text website.

The excel data file is on my laptop but im not sure how to attach a file. Please help with this problem! :) thanks so much!!!!!

Executive compensation has risen dramatically beyond the rising levels of an average worker’s wage over the years. This has been a hot topic for discussion, especially with the crisis in the financial sector and the controversy over the federal bailout. The government is even considering a cap on highflying salaries for executives (New York Times, February 9, 2009). Consider the following data, which link total compensation of the 455 highest-paid CEOs in 2006 with two performance measures (industry-adjusted return on assets (Adj ROA) and industry-adjusted stock return (Adj Stock Return)) and the firm’s size (Total Assets). The data, labeled Executive Compensation, are available on the text website.

50 5500 50 0 5 05 05 5 5550 5 0 0 0 918851397230149415147568929 377-.. 3 1 5 3, 1 7 1 8 1309.. 9 3 8 2 3 5 0 4 7 4 6 8 6 40 1 et 5 1 9 3 2 2 2 1 6 23938 6 0 8 3004 TA7128413211313-S4896719-12-14281542121211961-51214342 336 05 9 4 4 7 9 4 16 72 6 2 34 2 03 9 2 9 7 4722358622662685 AR-112000-000132000110-11-011001102001-2110310001221200101 ernse 5814708040931273575) 5 9 9 9 5 6 3 8 5 7 8 9 8 1 3 7 3 3 374404076332098 439065322 3 8 9 4 1 5 3 6 2 0 1 3 7 8 5 8 8 4 6 7 1 6 6 0 0 5 6 2 4 3 1 0 7 9 1 096559191 2776759729792794189228469545975) 9 4 3 5 7 8 3 8 3 8 4 6 7 9 9 7 6 9 2 12 esn C00000000000000000-000001000200100001100100000210000- 2 0 5 5 50 050 27 2 0 04 :5 18 50005 0 0 5 0 03,48043 0555.00 5 5 1 6 7 5 0 9 5 4 5 1 6 4 2 3 7 3 0 0 3 5 6 8 5 9 3 0 7 2 0 4 5 6 3 7 7 7 9 5 3 0 1 5 0 9 1597438 1 A4522 1 8 5 1 3 3 8 3 6 4 2 2 3 1 3 5 1 1 1 1 4 1 2 6 2 3 5 4 7 3 1 6 1 3 4 1 5 2 3 9 3 3 9 2 2 2 1 1 3 asa 15-1873 si AR-21000-0001111211011510-012-01-000030140010110110101201 3 257 ris lly en ue AR016-06000000101-00003460102100-0124-00031022001010101110 5 528 269 91030145 490348157, 8 7 1 7 5 1 18 19 783255627 C15163-6230141124193831821110133291106314132100001002 555 005 .5 5 5 0 .5 5 0 5 5 0 0 0 13 5 9 7 3 9 4 8 0 0 2 0 0 05005300550555 5.0 71 35 62 55 60 I et 1 5 8 0 7 1 2 4 8 3 3 1 5 6 9 5 3 8 0 1 0 0 7 1 5 2 6 4 7 6 5 9 5 6 5 6 1 3 4 4 9 8 9 6 1 0576102 2090, 3 4 6 5 0 0 6 7 5, 3 .. 4 90,9 5, 5 5 7 4 4. 7 1 3 0 9 0987231 1 2 6 2 8 9 5 0 9 7 3 ? TA2365-142563283431121113129-331621132285412485111-211 1.002,5 0249 1860102 de.. 5 2 2 ) 2 0 7 5 5 1 0 0 4 3 7 2 9 1 1 5 4 8 9 0 3 1 48146 12764 AR-0011-01-1. 0 0 0 0 3 5 2 1 1 0 0 1 0 0 0 0 2 0 1 0 0 0 1 0 2 2 0 0 1 0 2 0 2 0 0 1 0 0 0 0 1 1 1 0 59 277138539899 4 4 2 4 1 3 3 8 3 4 3 8 3 4 1 0 3 1 7 8 4 3 2 0 9 6 7 7 338 59814202145) 6 3 3 3 6 8 9 8 9 2 2 2 1 0 2 2 0 4 9 6 2 6 0 3 7 7 5 7 2 2 6 3 0 2 4 8 2 6 1 5 421795) 0 6 4 3 3 3 1 3 4 9 7 1 7 4 3 9 2 5 5 6 3 2 0 4 4 5243862723838 C-2103128101001100203101202021000000060000610002010-0

Explanation / Answer

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.019379941

R Square

0.000375582

Adjusted R Square

-0.001831094

Standard Error

9.793826656

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

1

16.32567219

16.32567219

0.170202622

0.680126971

Residual

453

43451.32538

95.91904057

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

10.13119918

0.651427766

15.55229866

5.1947E-44

8.851003842

11.41139452

Adj ROA

0.190638595

0.462091208

0.412556204

0.680126971

-0.717469779

1.098746969

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.048650603

R Square

0.002366881

Adjusted R Square

0.000164601

Standard Error

9.78406691

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

1

102.8827667

102.8827667

1.074740974

0.300430086

Residual

453

43364.76828

95.7279653

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

9.925267864

0.597267197

16.61780174

9.14058E-49

8.751509668

11.09902606

Adj Returns

0.396543429

0.38250653

1.036697147

0.300430086

-0.355163977

1.148250834

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.394999269

R Square

0.156024422

Adjusted R Square

0.154161341

Standard Error

8.999096829

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

1

6782.015136

6782.015136

83.74538917

1.93087E-18

Residual

453

36685.63591

80.98374374

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

9.1856603

0.439773861

20.88723575

2.38064E-68

8.321410302

10.0499103

Total Assets

2.65808E-05

2.90461E-06

9.151250689

1.93087E-18

2.08726E-05

3.2289E-05

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.050721067

R Square

0.002572627

Adjusted R Square

-0.001840769

Standard Error

9.793873944

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

2

111.8260391

55.91301954

0.582913249

0.558688729

Residual

452

43355.82501

95.91996684

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

9.795739396

0.733068848

13.36264584

1.47496E-34

8.355093277

11.23638551

Adj ROA

0.141885431

0.46466941

0.305347043

0.760242414

-0.771295076

1.055065937

Adj Returns

0.384181317

0.38502438

0.997810363

0.318905189

-0.372478689

1.140841323

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.401

R Square

0.160

Adjusted R Square

0.157

Standard Error

8.985

Observations

455.000

ANOVA

df

SS

MS

F

Significance F

Regression

2

6974.000166

3487.000083

43.18899314

6.84791E-18

Residual

452

36493.65088

80.73816567

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

8.505

0.623

13.655

0.000

7.281

9.729

Adj ROA

0.658

0.427

1.542

0.124

-0.181

1.497

Total Assets

0.000

0.000

9.283

0.000

0.000

0.000

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.401

R Square

0.160

Adjusted R Square

0.157

Standard Error

8.986

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

2

6973.394545

3486.697272

43.18452595

6.87364E-18

Residual

452

36494.2565

80.73950554

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

8.64

0.57

15.26

0.00

7.52

9.75

Total Assets

0.00

0.00

9.22

0.00

0.00

0.00

Adj Returns

0.54

0.35

1.54

0.12

-0.15

1.23

a-1)

Adj ROA: se: 9.79, r^2: 0.0003

Adj Return: se: 9.78, r^2: 0.002

Total Assets: se: 9, r^2: 0.156

a-2)

Model 3

b-1)

Adj ROA & Adj Returns: se: 9.79, r^2: 0.00257

Adj ROA & Total Assets: se: 8.985, r^2: 0.1604

Total Assets & Adj Returns: se: 8.985, r^2: 0.1604

All 3 variables: se: 8.976, r^2: 0.1640

b-2)

Model 4

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.019379941

R Square

0.000375582

Adjusted R Square

-0.001831094

Standard Error

9.793826656

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

1

16.32567219

16.32567219

0.170202622

0.680126971

Residual

453

43451.32538

95.91904057

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

10.13119918

0.651427766

15.55229866

5.1947E-44

8.851003842

11.41139452

Adj ROA

0.190638595

0.462091208

0.412556204

0.680126971

-0.717469779

1.098746969

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.048650603

R Square

0.002366881

Adjusted R Square

0.000164601

Standard Error

9.78406691

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

1

102.8827667

102.8827667

1.074740974

0.300430086

Residual

453

43364.76828

95.7279653

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

9.925267864

0.597267197

16.61780174

9.14058E-49

8.751509668

11.09902606

Adj Returns

0.396543429

0.38250653

1.036697147

0.300430086

-0.355163977

1.148250834

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.394999269

R Square

0.156024422

Adjusted R Square

0.154161341

Standard Error

8.999096829

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

1

6782.015136

6782.015136

83.74538917

1.93087E-18

Residual

453

36685.63591

80.98374374

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

9.1856603

0.439773861

20.88723575

2.38064E-68

8.321410302

10.0499103

Total Assets

2.65808E-05

2.90461E-06

9.151250689

1.93087E-18

2.08726E-05

3.2289E-05

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.050721067

R Square

0.002572627

Adjusted R Square

-0.001840769

Standard Error

9.793873944

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

2

111.8260391

55.91301954

0.582913249

0.558688729

Residual

452

43355.82501

95.91996684

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

9.795739396

0.733068848

13.36264584

1.47496E-34

8.355093277

11.23638551

Adj ROA

0.141885431

0.46466941

0.305347043

0.760242414

-0.771295076

1.055065937

Adj Returns

0.384181317

0.38502438

0.997810363

0.318905189

-0.372478689

1.140841323

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.401

R Square

0.160

Adjusted R Square

0.157

Standard Error

8.985

Observations

455.000

ANOVA

df

SS

MS

F

Significance F

Regression

2

6974.000166

3487.000083

43.18899314

6.84791E-18

Residual

452

36493.65088

80.73816567

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

8.505

0.623

13.655

0.000

7.281

9.729

Adj ROA

0.658

0.427

1.542

0.124

-0.181

1.497

Total Assets

0.000

0.000

9.283

0.000

0.000

0.000

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.401

R Square

0.160

Adjusted R Square

0.157

Standard Error

8.986

Observations

455

ANOVA

df

SS

MS

F

Significance F

Regression

2

6973.394545

3486.697272

43.18452595

6.87364E-18

Residual

452

36494.2565

80.73950554

Total

454

43467.65105

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

8.64

0.57

15.26

0.00

7.52

9.75

Total Assets

0.00

0.00

9.22

0.00

0.00

0.00

Adj Returns

0.54

0.35

1.54

0.12

-0.15

1.23

a-1)

Adj ROA: se: 9.79, r^2: 0.0003

Adj Return: se: 9.78, r^2: 0.002

Total Assets: se: 9, r^2: 0.156

a-2)

Model 3

b-1)

Adj ROA & Adj Returns: se: 9.79, r^2: 0.00257

Adj ROA & Total Assets: se: 8.985, r^2: 0.1604

Total Assets & Adj Returns: se: 8.985, r^2: 0.1604

All 3 variables: se: 8.976, r^2: 0.1640

b-2)

Model 4

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