Pay disparities within top management teams and earning management

Park, KoEun

doi:10.1016/j.jaccpubpol.2016.11.002

Cited by 53 publications

(26 citation statements)

References 75 publications

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“…Tournament theory posits executives as contestants for promotion, and the large pay disparity between the CEO and other senior executives is the prize for winning the tournament (Lazear and Rosen, ). Tournament incentives have been found to affect firm performance (Lazear and Rosen, ; Kale et al ., ; Bebchuk et al ., ), earnings manipulation (Park, ; Zhang et al ., ) and the cost of equity capital (Chen et al ., ), but no study yet exists that conditions tournament incentives on the distress status of firms.…”

Section: Consequences Of Financial Distressmentioning

confidence: 99%

Determinants and consequences of financial distress: review of the empirical literature

Habib

Costa

Huang

et al. 2018

Accounting & Finance

139

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We synthesise the empirical literature on the determinants and consequences of financial distress, critique the findings and offer suggestions for future research. We categorise these indicators into (i) firm-level fundamental determinants, (ii) macroeconomic determinants and (iii) firm-level corporate governance determinants. We categorise the consequences into (i) financial reporting and auditing consequences, (ii) firm-level operational consequences, (iii) capital market consequences and (iv) corporate governance consequences. We suggest that future research can make a more meaningful contribution, by developing more comprehensive models of predicting financial distress which will entail a departure from the current partial analysis to a more holistic complex analysis.

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Section: Consequences Of Financial Distressmentioning

confidence: 99%

Determinants and consequences of financial distress: review of the empirical literature

Habib

Costa

Huang

et al. 2018

Accounting & Finance

139

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“…In Equation 2, DA it represents the discretionary accruals of company i in year t. Discretionary accruals (DA) is used as the dependent variable to measure accounting quality. The controls include the debt ratio (LEV), asset growth ratio (GRW), change in capital (ISSUE) [52,53], return on assets (ROA), natural logarithm of total assets (SIZE), cash flow from operations (CFO) [54][55][56][57][58][59][60][61][62], and whether the auditor is a big four accounting firm (Big) [63][64][65][66][67][68][69].…”

Section: Earnings Management: Discretionary Accrualsmentioning

confidence: 99%

Does the IFRS Effect Continue? An International Comparison

2018

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Previous research showed that in the early years after adoption, the change to International Financial Reporting Standards (IFRS) impacted accounting quality. The purpose of this study is to analyze whether those effects have changed over time in companies within countries that have different legal regimes, enforcement, and degrees of external investor protection. We measure accounting quality using discretionary accruals, real activities manipulation, and the stock price value relevance of earnings per share and book value per share. The findings show that the early effects of IFRS adoption continue with the passage of time in companies listed in countries with common law systems, such as the United Kingdom (UK) and Australia, which provide powerful outside investor protection in capital markets. Yet, the early effects of IFRS adoption do not continue after the passage of time in companies listed in Asian countries with statutory law systems, such as Korea and China, which have low levels of outside investor protection. Moreover, it is difficult to obtain evidence that value relevance has improved after the accounting measurement of corporate value shifted to IFRS. The results show that there are differences in the sustained effects on accounting quality, even after the application of IFRS due to the different social, economic, and cultural characteristics of countries.

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“…For example, Kini and Williams (2012) document that the pay gap between the CEO and VPs is positively associated with riskier firm policies. Similarly, Park (2017) finds that the pay gap between the CEO and VPs is positively associated with real earnings management.…”

Section: Introductionmentioning

confidence: 94%

“…1 Kale, Reis, and Venkateswaran (2009) find that VP promotion-based incentives, measured by the pay gap between the CEO and VPs, are positively associated with firm performance and firm value. In contrast, several studies provide evidence that large pay gaps may negatively affect firms' policies and performance (e.g., Henderson and Fredrickson, 2001; Kini and Williams, 2012;Park, 2017). For example, Kini and Williams (2012) document that the pay gap between the CEO and VPs is positively associated with riskier firm policies.…”

Section: Introductionmentioning

confidence: 99%

CFO Promotion-Based Incentives and Earnings Management.

Liu¹,

Lin²,

Wang³

2020

Preprint

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This study examines whether CFO promotion-based incentives induce opportunistic reporting activities. We find that CFO promotion-based incentives, measured by the pay gap between the CEO and the CFO, are positively associated with accruals management and accounting misconduct in the pre-SOX period and the probability of meeting or beating analysts' forecasts in both pre-and post-SOX periods. Further analysis shows that CFO promotion-based incentives are negatively associated with real earnings management in both pre-and post-SOX periods. In addition, we find some evidence that the association between CFO promotion-based incentives and opportunistic reporting activities is stronger before CEO turnovers. We also document that CFOs engage in more opportunistic financial reporting when the pay gap between the CFO and other VPs is greater. Overall, our findings suggest that CFO promotion-based incentives may encourage CFOs to engage in opportunistic reporting activities but mitigate real earnings management.

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Pay disparities within top management teams and earning management

Cited by 53 publications

References 75 publications

Determinants and consequences of financial distress: review of the empirical literature

Determinants and consequences of financial distress: review of the empirical literature

Does the IFRS Effect Continue? An International Comparison

CFO Promotion-Based Incentives and Earnings Management.

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