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Author: Bo Sun
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Bo Sun
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Bo Sun
Publisher: DIANE Publishing
ISBN: 1437930980
Category : Business & Economics
Languages : en
Pages : 33
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Book Description
Analyzes executive compensation in a setting where managers may take a costly action to manipulate corporate performance, and whether managers do so is stochastic. Examines how the opportunity to manipulate affects the optimal pay contract, and establishes necessary and sufficient conditions under which earnings management occurs. The author¿s model provides a set of implications on the role earnings management plays in driving the time-series and cross-sectional variation of executive compensation. In addition, the model's predictions regarding the changes of earnings management and executive pay in response to corporate governance legislation are consistent with empirical observations. Charts and tables.
Author: Christopher L. Jones
Publisher:
ISBN:
Category :
Languages : en
Pages : 290
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Book Description
Author: David Aboody
Publisher: Now Publishers Inc
ISBN: 1601983425
Category : Business & Economics
Languages : en
Pages : 98
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Book Description
Executive Compensation and Financial Accounting provides research perspectives on the interface between financial reporting and disclosure policies and executive compensation. In particular, it focuses on two important dimensions: - the effects of compensation-based incentives on executives' financial accounting and disclosure choices, and - the role of financial reporting and income tax regulations in shaping executive compensation practices. Executive Compensation and Financial Accounting examines the key dimensions of the relation between financial accounting and executive compensation. Specifically, the authors examine the extent to which compensation plans create incentives for executives to make particular financial reporting and disclosure choices. They also examine the extent to which accounting regulation creates incentives for firms to design particular compensation plans for their executives.
Author: Andrea L. Gouldman
Publisher:
ISBN:
Category : Executives
Languages : en
Pages : 61
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Book Description
This study examines the effects of research and development (R&D) reporting method and managerial knowledge of supervisor compensation on R&D project continuation decisions. The current study employs an experiment with a 2x3 between-participants design, manipulating both R&D reporting method (expense vs. capitalize) and knowledge of supervisor compensation (control group with no knowledge vs. knowledge of non-restricted stock compensation vs. knowledge of restricted stock compensation). Using salient short-term incentives to motivate real earnings management, this study demonstrates that capitalization may result in managers foregoing economically efficient R&D investment opportunities. The results indicate that managerial knowledge of supervisor compensation structure has little influence on managers' R&D project continuation choices. However, when managers capitalizing R&D expenditures had knowledge that their supervisors received non-restricted (short-term) stock compensation their perceived personal responsibility for the decision significantly decreased. Participants who capitalized R&D expenditures and had knowledge that their supervisor received restricted (long-term) stock compensation rated the importance of making a decision to please their supervisor significantly higher than all other participants. Additionally, participants with knowledge that their supervisors restricted stock compensation were significantly more concerned about the likelihood of negative personal repercussions regardless of R&D reporting method. These findings contribute to the management accounting literature by providing new insights on the influence of knowledge of supervisor compensation on managerial decision making as well as additional insights into the factors that contribute to and limit real earnings management. This study also extends the literature on R&D by providing evidence of the potential for real earnings management when R&D expenditures are capitalized in the absence of personal responsibility.
Author: Sandeep Goel
Publisher: Independent Author
ISBN: 9781805294382
Category :
Languages : en
Pages : 0
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Book Description
Earnings management by companies has long been documented in the academic literature. The scale of the problem came under the spotlight, with major scandals around the world, shaking investors' faith in published company accounts. CEOs and other top executives have been found to manage their earnings aggressively, not only through accounting sleight-of-hand but also by skewing corporate policies in the hope of improving their company's apparent performance. In many cases, earnings management was driven by the desire to prop the company's stock price, often the key basis for executive compensation. Earnings management is the intentional misstatement of earnings leading to bottom line numbers that would have been different in the absence of any manipulation. Earnings management does not necessarily mean upward manipulation of earnings, but it includes downward manipulation as well. Earnings management in the present competitive world is an economic reality. In the words of Ralph Ward, "It is easier to hide voodoo numbers under headings that are already fuzzy". The regulators are now increasingly cracking down hard on companies indulging in earnings management and questioning the efficacy of even those accounting standards that were quite acceptable till a few years ago. The borrower firms, in particular, are still comfortable and not helpless in market that supports them more than the lenders. So, what are the options before stakeholders who have always attached extraordinary importance to and relied excessively on financial statements which are now posing new challenges to them. Think of the plight of a common man (shareholder)! Users of financial statements are often forced to wrestle with dramatic differences in reporting practices between companies within the same industries; asymmetry of information abounds. Intangibles, such as the credibility or reputation of corporate management, must be considered when analyzing a company. Discretionary choices in financial reporting that can ultimately lead to, or create; future earnings that drive stock prices must be identified and adjusted for. As a result, financial statements users must develop a keen understanding of the fundamentals underlying each firm's business operations. While the regulatory bodies, viz. SEC and SEBI have been expressing concern over the issue and their comments to investigate earnings manipulation have sparked renewed interest in the area, there has been little contribution in the academic and professional literature on the detection of earnings manipulation, particularly in India. This book is based on a study that aims to unfold designed earnings practices in the Indian corporate enterprises for the period 2003-04 to 2007-08. It contributes to the literature by increasing the knowledge as to where and when earnings management is likely to occur. It tries to assist investors and creditors in making investing and lending decisions by making them aware not only of the reliability (or truthfulness) of financial statements, but also to the relevance and predictive value of information presented in financial statements. Answers to issues and questions raised in the above discussion can help standard setters assess the effects of accounting standards that require management judgment. It would ultimately lead to less erosion of shareholders' value in particular and economy resources in general. So, an insight into earnings management is essential for all the market participants to extract the best use of financial statements. In some sense, the onus lies on academia and financial practitioners to focus on the importance of understanding a firm's accounting practices.
Author: Stephan Pietge
Publisher: GRIN Verlag
ISBN: 3638699668
Category : Business & Economics
Languages : en
Pages : 93
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Book Description
Bachelor Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1.0 (A), Edinburgh Napier University (Business School), 200 entries in the bibliography, language: English, abstract: For several decades academics have been looking for an efficient performance measure, which not only reflects the effectiveness and efficiency of the firm, but also aligns manager′s and shareholder′s interests. Even though many studies question the merit of a single measure for overall firm performance, Stern and Stewart claim to have solved the puzzle with a method labeled Economic Value Added (EVA). This paper examines two aspects: First, EVA′s predicting power regarding stock returns and second, its impact on management behavior as an element of executive compensation. At first glance, Stern and Stewart seem to be right. During the early 1990s their approach gained tremendous popularity, reflected by dozens of anecdotal success stories. Though EVA′s demand of integrating a total capital charge is appealing, the concept is by no means new. The framework of residual income (economic profit), which has been around for decades, also requires a charge for equity capital. Further, some scholars criticize the use of accounting adjustments in order to calculate EVA and its ability to capture performance at the divisional level. So far there is no independent empirical evidence that EVA is superior to accounting measures in predicting stock returns. Some studies even question EVA′s incremental value regarding executive compensation by stating that economic profit is doing as good a job. Consequently, it is tempting to doubt that Economic Value Added indeed adds any value.
Author: Christine E. L. Tan
Publisher:
ISBN:
Category :
Languages : en
Pages : 54
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Book Description
Increasingly, shareholders and regulators have been calling for a reigning in of executive salaries. Most of this discussion has focused on bonuses and stock options, the more observable portions of an executive compensation package. However long term incentive pay, such as supplemental executive retirement plans (SERPs), has become a significant portion of executive compensation and is more difficult to monitor. This paper examines whether managers use real earnings management in the form of Accelerated Share repurchases (ASR) to increase total compensation through this more obscure or 'stealth', area of pay. This is because ASRs tend to have a more immediate and significant impact on EPS versus open market repurchases (OMRs). While SERPs provide an opportunity for CEOs to hide compensation, stronger managerial power may enhance this opportunity. We find evidence that managers who have SERPs in place are significantly more likely to choose ASRs versus OMRs. We also find that as executives' horizon shorten, they are also more likely to use this stronger form of earnings management (ASR). Additionally, we find that, on average, ASR firms have higher managerial power than OMR firms. Finally, we are able to provide direct evidence of the economic significance of SERP programs. Additional analyses provide further support for the link between SERPs and real earnings management in the form of share repurchase choice.
Author: Lucian A. Bebchuk
Publisher: Harvard University Press
ISBN: 9780674020634
Category : Business & Economics
Languages : en
Pages : 308
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Book Description
The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Author: Joshua Ronen
Publisher: Springer Science & Business Media
ISBN: 0387257713
Category : Business & Economics
Languages : en
Pages : 587
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Book Description
This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
