Predictive versus opportunistic earnings management, executive compensation, and firm performance

Adut, Davit; Holder, Anthony Dewayne; Robin, Ashok

doi:10.1016/j.jaccpubpol.2013.02.007

Cited by 32 publications

(20 citation statements)

References 69 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Matolcsy and Wright, ; Benson et al ., ; Hsieh et al ., ) has thoroughly examined CEO compensation. However, the relation between equity compensation and manager incentives is inconclusive (Elayan et al ., ; Armstrong et al ., ; Adut et al ., ). Furthermore, several researchers (e.g.…”

Section: Introductionmentioning

confidence: 97%

Timing of earnings restatements: CEO equity compensation and market reaction

BenYoussef

Khan

2016

Accounting & Finance

View full text Add to dashboard Cite

This study investigates the impact of chief executive officers' (CEO) compensation on their choices regarding the timing of earnings restatements. The results indicate a negative relationship between options exercised and lags in disclosing the restated earnings, suggesting that managers who exercise options in a given year tend to release information quickly. This effect is more pronounced if the options are exercised after the dark period. We also find that the market penalises longer lags in the restatement disclosure. It seems that the CEO would try to optimise the timing of information release so as to balance the costs and benefits.

show abstract

Section: Introductionmentioning

confidence: 97%

Timing of earnings restatements: CEO equity compensation and market reaction

BenYoussef

Khan

2016

Accounting & Finance

View full text Add to dashboard Cite

show abstract

“…Existing literature shows that executives justify their excess compensation in several ways, including choosing benchmarks (Albuquerque, Franco, & Verdi, ), discussing the alignment of managerial and shareholder interests (Wade, Porac, & Pollock, ), discussing company performance (Adut, Holder, & Robin, ), and attributing to increased information disclosure (Hermalin & Weisbach, ). However, prior studies on the relationship between executive compensation and corporate information disclosure primarily focus on corporate financial information disclosure.…”

Section: Introductionmentioning

confidence: 99%

Executives' excess compensation, legitimacy, and environmental information disclosure in Chinese heavily polluting companies: The moderating role of media pressure

Chen

et al. 2018

Corp Soc Responsibility Env

View full text Add to dashboard Cite

This study examines whether executives justify their excess compensation through environmental information disclosure using a sample of listed companies in China's heavily polluting industries from 2010 to 2014. We find that executives' excess compensation is positively related to the quality of environmental information disclosure.The above relationship is significant in cases with strong demand for compensation justification (i.e., state-owned enterprises and firms where an internal compensation gap is salient), indicating that executives manipulate environmental information disclosure about their companies according to their purposes. We also find that media pressure weakens the above relationship. A further test affirms a differential influence of media pressure in settings that involve public or private ownership, development of markets, and low or high product market competition. This study reveals a self-serving motive of executives for environmental information disclosure. The findings of this study have practical implications for regulators, shareholders, and managers.

show abstract

“…Armstrong, Larcker, Ormazabal, and Taylor (2013) measure misreporting using discretionary accruals, restatements, and enforcement actions, and find evidence of a positive relation between vega and misreporting. Although most studies find a positive relation between CEO's monetary incentives and earnings management, Adut, Holder, and Robin (2013) and Gong and Li (2013) do not find evidence of an opportunistic behavior in the presence of high CEO compensation. Specifically, Adut et al (2013) show that CEO compensation levels are positively related to predictive earnings management and negatively related to opportunistic earnings management.…”

Section: Introductionmentioning

confidence: 83%

“…Although most studies find a positive relation between CEO's monetary incentives and earnings management, Adut, Holder, and Robin (2013) and Gong and Li (2013) do not find evidence of an opportunistic behavior in the presence of high CEO compensation. Specifically, Adut et al (2013) show that CEO compensation levels are positively related to predictive earnings management and negatively related to opportunistic earnings management. Similarly, Gong and Li (2013) find that in companies with higher CEO equity incentives, current year earnings are more informative of future earnings than in other companies.…”

Section: Introductionmentioning

confidence: 83%

CEO Risk Incentives and Real Earnings Management

Fabrizi¹,

Parbonetti²

2016

IJBM

View full text Add to dashboard Cite

Previous research shows that companies use option compensation to motivate managers to accept risk (Jensen & Meckling, 1976). Indeed, risk adverse CEOs are likely to accept less risk than that accepted by diversified shareholders (Fama & French, 1992). Nonetheless, not all risks produce the expected benefits and risk has an intrinsic cost, such as potential large losses, that cannot be eliminated. Therefore, given CEO risk incentives, real earnings management can be viewed as a mechanism used to avoid the undesirable consequences of risk on reported earnings. However, engaging in real earnings management requires cutting investments, such as R&D, that have a well-documented association with firm's future risk profile (Comin & Philippon, 2005). As a consequence, the use of real earnings management by CEOs with high-risk incentives as a tool for mitigating the intrinsic costs of risk is an empirical question that we tackle in this paper. Using a sample of quarterly observations from US firms over the period [2003][2004][2005][2006][2007][2008][2009][2010], and an instrumental variable approach to overcome endogeneity concerns, we show that CEOs with high risk-related incentives engage less in real activity manipulations that encompass cutting discretionary expenditures than do executives with low incentives. These findings are consistent with the idea that CEOs incentivized on risk avoid engaging in real management activities that can decrease firm's future risk profile.

show abstract

Predictive versus opportunistic earnings management, executive compensation, and firm performance

Cited by 32 publications

References 69 publications

Timing of earnings restatements: CEO equity compensation and market reaction

Timing of earnings restatements: CEO equity compensation and market reaction

Executives' excess compensation, legitimacy, and environmental information disclosure in Chinese heavily polluting companies: The moderating role of media pressure

CEO Risk Incentives and Real Earnings Management

Contact Info

Product

Resources

About