The effect of directors’ equity incentives on earnings management

Ronen, Joshua; Tzur, Joseph; Yaari, Varda

doi:10.1016/j.jaccpubpol.2006.05.007

Cited by 56 publications

(33 citation statements)

References 43 publications

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“…For example, Bergstresser and Philippon (2006) find evidence that the use of discretionary accruals to manipulate reported earnings is more pronounced at firms where the CEO's potential total compensation is more closely tied to the value of stock and option holdings. Ronen et al (2006) report that earnings management distorts the stock price of a firm and it reduces the firm's value because of its unfavorable effect on manager's efforts.…”

Section: Personal Benefit and Professional Commitmentmentioning

confidence: 99%

The Effect of Ethical Orientation and Professional Commitment on Earnings Management Behavior

2007

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Section: Personal Benefit and Professional Commitmentmentioning

confidence: 99%

The Effect of Ethical Orientation and Professional Commitment on Earnings Management Behavior

2007

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“…INEDs (e.g., Hempel & Fay, 1994;Cordeiro et al, 2000;Yermack, 2004;Ronen, Tzur & Yaari, 2006;Magnan et al, 2010). Given the characteristics of the INEDs' job as well as the recommendations by most corporate governance codes in Europe (e.g., UK Corporate Governance Code, 2012;Italian Code of Conduct, 2006Dutch Corporate Governance Code, 2008; Spanish Unified Good Governance Code, 2006;ICGN, 2010) …”

Section: Introductionmentioning

confidence: 99%

The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory

Mallin

Melis

Gaia

2015

International Business Review

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This study investigates independent non-executive directors' remuneration from an agency theory perspective, taking into account both optimal contracting and managerial power perspectives. Using a sample of 1733 independent non-executive directors' year observations in Italian and UK non-financial firms listed in the period 2007-2009, we find that in both countries independent non-executive directors' remuneration is mainly based on the observable effort they exert and their responsibilities. Our findings also show that independent non-executive directors who do not fulfil formal independence criteria, as stated in the respective national corporate governance codes, seem to be paid more than those who do fulfil such criteria, particularly in the UK.Our findings contribute to the existing literature by providing evidence on the determinants of independent non-executive directors' remuneration in two major European economies and offer insights to policy-makers by questioning the effectiveness of adopting non-binding criteria when assessing non-executive directors' independence.

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“…1607 Ibid at 362, 380. The results of Ronen, Tzur and Yaari (2006) were generated from a model designed by the authors, not from empirical research. 1608 Timing opportunism refers to the opportunistic practice where CEOs increase the value of their option grants by lowering their firms' stock prices on days when they receive option grants.…”

Section: The Impact Of Stock Grants For Independent Directors On Sharmentioning

confidence: 99%

Are Independent Directors Effective Corporate Monitors? An Analysis of the Empirical Evidence in the USA and Canada

Lai

2014

SSRN Journal

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This thesis explores whether independent directors in the USA and Canada are effective in holding management accountable by: (1) analyzing how the policy of relying on independent directors developed and operates; (2) introducing the main theoretical critiques of independent directors' monitoring effect; and (3) examining whether empirical studies in the field of management science and financial economics support the policy in both countries of relying on independent directors as corporate monitors.Empirical evidence shows that boards with a majority of independent directors, in some circumstances, were associated with better firm performance (in the post-SOX period) and fulfilled certain board tasks effectively in the United States. Canadian studies, however, have not shown a positive association with improved firm performance. Audit committees composed entirely of independent directors have been effective in ensuring the quality of financial reporting in the United States, but this effect has not been found in Canada. Compensation committees composed fully of independent directors neither constrained the level of executive compensation nor tied CEO pay to firm performance in either country. US firms with an audit committee member who had accounting expertise, rather than financial analysis or supervisory expertise, were associated with a higher quality of financial reporting, while Canadian firms with an audit committee member who has financial expertise, instead of financial literacy, were associated with a similar effect. Studies also showed that independent directors perform better in certain circumstances.Based on empirical evidence, US regulators should consider: (1) changing the current mandatory requirements for an independent board and a completely independent compensation committee to a comply-or-explain requirement; (2) narrowing the qualification of a financial expert to an individual who has accounting expertise; and (3) recruiting independent directors who have two or fewer outside directorships, hold more of the corporation's shares, have lower cost of acquiring corporate information, and have no social connections with the CEO. In Canada, weak evidence of the monitoring effectiveness of independent directors supports the existing comply-or-explain approach. Canadian regulators may only need to require or recommend that at least one audit committee member has financial expertise, instead of only financial literacy.ii

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The effect of directors’ equity incentives on earnings management

Cited by 56 publications

References 43 publications

The Effect of Ethical Orientation and Professional Commitment on Earnings Management Behavior

The Effect of Ethical Orientation and Professional Commitment on Earnings Management Behavior

The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory

Are Independent Directors Effective Corporate Monitors? An Analysis of the Empirical Evidence in the USA and Canada

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