Accounting Comparability and Relative Performance Evaluation in CEO Compensation

Lobo, Gerald J.; Neel, Michael J.; Rhodes, Adrienne

doi:10.2139/ssrn.2995039

Cited by 6 publications

(6 citation statements)

References 22 publications

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“…Regarding the moderating effect of the profitability on the relationship between audit style and earnings comparability, Panel C of Table 5 shows that the model is significant (p-value < 0.05), and the adjusted R 2 is increased from 10% to 94%. Although the coefficient of the interactive variable Same_Audit*Diff_ROA is negative (-0.0804) which is consistent with Lobo et al (2018), it is statistically insignificant (p-value > 0.05). Accordingly, H4 is not supported.…”

Section: Results Of the Firm Characteristics Moderating Modelssupporting

confidence: 69%

“…Nevertheless, according to the positive accounting theory, firms may resort to earnings management to avoid reporting volatile profit across periods or increase the managerial compensation (Agyei-Mensah, 2013;Ross et al, 2019;Soyemi & Olawale, 2019). Moreover, Lobo et al (2018) suggest that firms with similar economic circumstances would achieve similar operating results, in turn, would have more comparable earnings.…”

Section: The Moderating Effect Of Firm Characteristics On the Relatiomentioning

confidence: 99%

“…Where the interactive variable Same_Auditijt*Diff_ROAijt is expected to have a negative coefficient β3, since the lower the difference in the ROA between a firm-pair, the lower the differences in their DAs, and then the greater the earnings comparability. Diff_ROA is measured as the absolute value of the difference in ROA between firm-pairs, measured as the net income divided by total assets (Lobo et al, 2018).…”

Section: Diff_daijt= α0+ β1same_auditijt+ β2diff_roaijt+ β3same_auditmentioning

confidence: 99%

“…Diff_ROA +/-The absolute value of the difference in ROA between firm-pairs, measured as the net income divided by total assets (Lobo et al, 2018). Profitability* Audit style…”

Section: Profitabilitymentioning

confidence: 99%

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The Moderating Effect of Firm Characteristics on the Relationship between the Audit Style and Firm-pair Earnings Comparability: An Evidence from Listed Firms on the Egyptian Stock Exchange

Saleh

2021

المجلة العلمیة للدراسات والبحوث المالیة والتجاریة

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Purpose -This research aims to study and investigate the relationship between the audit style and earnings comparability. Also, the research examines the influence of some firm-specific characteristics, as moderating variables, on this relationship. Design/Methodology -Ordinary Least-Squares (OLS) regression and multiple regressions are used to test the research hypotheses. The sample used in the current study consists of 57 non-financial firms listed on the Egyptian Stock Exchange (EGX) during 2016-2019 resulting in a final sample of 1,039 firm-pair year observations. Findings -The researcher concludes that the audit style, as measured by whether each firm-pair is audited by the same audit firm, has a significant positive effect on the earnings comparability, as measured by the differences in the discretionary accruals between firm-pairs. Besides, the positive effect of the audit style on earnings comparability has been strengthened under the presence of the firm size as a moderating variable, but it does not vary by the leverage and profitability moderating variables. These findings are robust since the results of the sensitivity analyses, using the Big 4 audit firms and the differences in the operating cash flows as alternative measures to the audit style and earnings comparability, respectively, support the results of the basic analysis. However, the results under the additional analysis indicate that all firm characteristics have a significant positive effect on the differences in the discretionary accruals which, in turn, means a negative effect on earnings comparability. Originality/value -To the best of the researcher's knowledge, there is relatively limited evidence on the comparability of earnings, as measured by the differences in discretionary accruals between firm-pairs, and its association with the audit style under the presence of firm characteristics as moderating variables. Furthermore, the findings of this research have some implications for researchers, audit firms, and regulatory bodies who seek to enhance the quality of the financial statements in emerging economies.

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Section: Results Of the Firm Characteristics Moderating Modelssupporting

confidence: 69%

Section: The Moderating Effect Of Firm Characteristics On the Relatiomentioning

confidence: 99%

Section: Diff_daijt= α0+ β1same_auditijt+ β2diff_roaijt+ β3same_auditmentioning

confidence: 99%

“…Diff_ROA +/-The absolute value of the difference in ROA between firm-pairs, measured as the net income divided by total assets (Lobo et al, 2018). Profitability* Audit style…”

Section: Profitabilitymentioning

confidence: 99%

See 2 more Smart Citations

The Moderating Effect of Firm Characteristics on the Relationship between the Audit Style and Firm-pair Earnings Comparability: An Evidence from Listed Firms on the Egyptian Stock Exchange

Saleh

2021

المجلة العلمیة للدراسات والبحوث المالیة والتجاریة

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“…Under the influence of the positive accounting theory, the determinators of accounting choice have been examined from four main perspectives include (a) agent theory, (b) the true reflection hypotheses, (c) income management, and (d) comprehensive framework. Numerous studies have found that accounting method selection is heavily influenced by CEOs' personal motives, such as personal economic benefits, CEO tenure and reputation [12,13]. However, other studies believe that accounting method selection is made by CEOs of the companies under investigation to properly reflect the companies' true performance and financial situation [1,10,14,15].…”

Section: Influential Factors In Accounting Methods Selectionmentioning

confidence: 99%

Accounting method selection using neural networks and multi-criteria decision making

Duan

Yeh²,

Dowe³

2021

Proceedings of the Annual Hawaii International Conference on System Sciences

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The selection of accounting methods has significant impacts on companies' accounting results and strategic goals. However, this selection problem has not been effectively addressed by existing studies. To fill this important gap, we propose a novel approach for evaluating two accounting method alternatives, namely Full Cost (FC) and Successful Effort (SE) with an empirical case of an oil and gas company. Neural networks (NNs), fuzzy multi-criteria decision making (MCDM) with optimal weighting are applied to evaluate the consequent effects of FC and SE on strategic goals of the case company. The empirical study conducted demonstrates the effectiveness of the proposed approach. Methodologically, this paper provides a structured approach for evaluating accounting method alternatives in a rational and informed manner. Empirically, the evidence obtained from applying the proposed approach can be used to support the case company's decision on accounting method selection.

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CEO compensation and real estate prices: pay for luck or pay for action?

et al. 2022

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This paper uses variation in real estate prices to study Chief Executive Officer (CEO) pay for luck. We distinguish between pay for luck and pay for responding to luck (action) by exploiting US GAAP accounting rules, which mandate that real estate used in the firm’s operations is not marked-to-market. This setting allows us to empirically disentangle pay for luck from pay for action, as a change in the value of real estate is only accounted for when the CEO responds to changes in property value. We show that CEO compensation is associated with the following two managerial responses to changes in real estate values: (i) real estate sales and (ii) debt issuance. Overall, we show that CEOs are rewarded for taking value-enhancing actions in response to luck.

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Accounting Comparability and Relative Performance Evaluation in CEO Compensation

Cited by 6 publications

References 22 publications

The Moderating Effect of Firm Characteristics on the Relationship between the Audit Style and Firm-pair Earnings Comparability: An Evidence from Listed Firms on the Egyptian Stock Exchange

The Moderating Effect of Firm Characteristics on the Relationship between the Audit Style and Firm-pair Earnings Comparability: An Evidence from Listed Firms on the Egyptian Stock Exchange

Accounting method selection using neural networks and multi-criteria decision making

CEO compensation and real estate prices: pay for luck or pay for action?

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