Earnings and cash flow comparability in executive compensation

Park, Sung-Jin; Nwaeze, Emeka T.

doi:10.1080/16081625.2021.1953389

Cited by 3 publications

(3 citation statements)

References 43 publications

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“…When a firm's comparability improves, the stock returns of the peer firms become less adversely related to CEO compensation. This implies that when comparability improves, the filtering effect of stock return-based relative performance evaluation reduces (Park and Nwaeze, 2023).…”

Section: -2 Advantages Of Comparabilitymentioning

confidence: 99%

نمط المراجعة وقابلية القوائم المالية للمقارنة "دراسة تطبيقية علي الشركات المقيدة بالبورصة المصرية(باللغة الانجليزية)

سلامة,

رمضان,

ابوزيد

2024

مجلة الاسکندرية للبحوث المحاسبية

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The purpose of this study is to investigate the effect of audit style on financial statements comparability. The term "audit style" is used to describe the distinct set of internal rules and operating procedures employed by each of the Big 4 audit firms to apply auditing standards and enforce accounting standards among its clients. Comparability is measured by how accruals and earnings structures of two businesses operating in the same industry are more similar. Firm size, leverage ratio, market to book ratio, sales revenue, sales growth, and cash flow from operations are used as control variables. The research sample consists of 30 Real Estate companies and 27 Food, Beverage and Tobacco companies listed on the Egyptian stock exchange from 2018 to 2022, resulting in a final sample of 1,410 firm-pair observations using stratified random sampling technique. The study provided evidence that audit style has a significant positive effect on financial statements comparability, as measured by the covariation in accruals and earnings. The findings show that there is higher comparability between firm-pairs in the same sector audited by the same Big 4 audit firm than those audited by different Big 4 audit firms. Moreover, improved comparability is found between firmpairs audited by Big 4 audit firms than those audited by non-Big 4 audit firms.

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Section: -2 Advantages Of Comparabilitymentioning

confidence: 99%

نمط المراجعة وقابلية القوائم المالية للمقارنة "دراسة تطبيقية علي الشركات المقيدة بالبورصة المصرية(باللغة الانجليزية)

سلامة,

رمضان,

ابوزيد

2024

مجلة الاسکندرية للبحوث المحاسبية

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“…Comparability could help boards in their objective selection of comparable firms (De Franco et al, 2011). Park and Nwaeze (2023) found that peer firms' stock returns get less negatively associated with CEO compensation as a firm's earnings comparability increases. It suggests that the filtering role of stock return-based relative performance evaluation decreases as earnings comparability increases.…”

Section: Ceo Incentive Plans and Accounting Comparabilitymentioning

confidence: 99%

The impact of accounting comparability on CEO incentive plans in an emerging economy: the moderating role of board independence

Arianpoor,

Efazati

2023

ARA

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PurposeThe present study investigates the impact of accounting comparability on chief executive officer (CEO) incentive plans and the moderating role of board independence for companies listed in Tehran Stock Exchange (TSE).Design/methodology/approachThe information about 177 companies in 2014–2021 was examined. In this study, equity-based compensation and cash-based compensation were used as the CEO incentive plans. The equity-based compensation was calculated through the ownership of the CEO shares.FindingsThe results suggest that the higher accounting comparability increases not only CEO equity-based compensation, but also cash-based compensation. Board independence also strengthens the relationship between accounting comparability and CEO compensation. Hypothesis testing based on robustness checks confirmed these results.Originality/valueThe paper is pioneering, to the authors' knowledge, in identifying how board independence moderates the impact of accounting comparability on CEO compensation. The findings provide insights into economic consequences to the firm related to accounting comparability and board monitoring. The results have important practical implications for international investors to evaluate accounting comparability, corporate governance mechanisms and CEO incentives.

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“…Accounting comparability is considered a distinctive quality among other qualitative attributes of financial information, which leads to the improvement of a company's mechanisms (Choi and Suh, 2019) and has attracted the attention of both theoretical and technical perspectives when it brings many benefits to investors and stakeholders (Anh Thu et al, 2023;Wang et al, 2020). Park and Nwaeze (2023) found that earnings (cash flow) comparability is positively associated with the compensation weight of earnings (cash flow) and negatively associated with the weight of cash flow (earnings), suggesting a substitution effect between earnings and cash flow measures. Previous research on earnings volatility suggests that volatility has significantly increased over time and the higher earnings volatility reduces earnings forecasting (Bryan and Mason, 2020b;Bryan et al, 2018;Dichev and Tang, 2008).…”

Section: Introductionmentioning

confidence: 99%

The impact of earnings volatility, environmental uncertainty and COVID-19 pandemic on accounting comparability in an emerging economy

Arianpoor

Asali

2023

ARA

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PurposeThe present study investigated the impact of earnings volatility and environmental uncertainty on accounting comparability in an emerging economy and the moderating role of COVID-19 pandemic for the companies listed on Tehran Stock Exchange (TSE).Design/methodology/approachThe data about 181 companies during 2014–2021 were examined. In this study, accounting comparability was predicted for the firms' accounting systems and the coefficient estimates were calculated. The present study used the coefficient of variation of sales to capture sales volatility as the primary environmental uncertainty measure.FindingsThe results showed that both the earnings volatility and environmental uncertainty have a significant negative effect on accounting comparability, and that COVID-19 significantly increases the negative impact of earnings volatility and environmental uncertainty on accounting comparability. The hypothesis testing based on robust, GLS, GMM, GLM, OLS regressions and t+1 test confirmed these results.Originality/valueThe present study aimed to develop knowledge-providing benefits for companies about the accounting comparability and managing more efficient decisions. The present findings help investors to understand and evaluate the performance of firms more accurately especially in earnings volatility and environmental uncertainty conditions and in the wake of a pandemic crisis such as COVID-19.

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Earnings and cash flow comparability in executive compensation

Cited by 3 publications

References 43 publications

نمط المراجعة وقابلية القوائم المالية للمقارنة "دراسة تطبيقية علي الشركات المقيدة بالبورصة المصرية(باللغة الانجليزية)

نمط المراجعة وقابلية القوائم المالية للمقارنة "دراسة تطبيقية علي الشركات المقيدة بالبورصة المصرية(باللغة الانجليزية)

The impact of accounting comparability on CEO incentive plans in an emerging economy: the moderating role of board independence

The impact of earnings volatility, environmental uncertainty and COVID-19 pandemic on accounting comparability in an emerging economy

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