The Effects of Relative Changes in CEO Equity Incentives on the Cost of Corporate Debt

2013 ◽  
Vol 40 (3-4) ◽  
pp. 470-500 ◽  
Author(s):  
Andrew K. Prevost ◽  
Erik Devos ◽  
Ramesh P. Rao
Keyword(s):  
Corporate Debt ◽  
Equity Incentives ◽  
The Cost

Equity Volatility, Takeover Defenses, and the Cost of Corporate Debt and Equity Finance

2012 ◽  
Author(s):  
Lewis W Gaul ◽  
Ajay A. Palvia ◽  
Pinar Uysal
Keyword(s):  
Corporate Debt ◽  
Takeover Defenses ◽  
Equity Finance ◽  
The Cost

The effect of political uncertainty on the cost of corporate debt

2015 ◽  
Vol 16 ◽  
pp. 106-117 ◽  
Author(s):  
Maya Waisman ◽  
Pengfei Ye ◽  
Yun Zhu
Keyword(s):  
Corporate Debt ◽  
Political Uncertainty ◽  
The Cost

Board Networks and the Cost of Corporate Debt

2010 ◽  
Author(s):  
Tuugi Chuluun ◽  
Andrew K. Prevost ◽  
John Puthenpurackal
Keyword(s):  
Corporate Debt ◽  
The Cost ◽  
Board Networks

scholarly journals Did Securitization Affect the Cost of Corporate Debt?

2011 ◽  
Author(s):  
Taylor Nadauld ◽  
Michael Weisbach
Keyword(s):  
Corporate Debt ◽  
The Cost

scholarly journals Executive equity incentives and opportunistic manager behavior: new evidence from a quasi-natural experiment

2021 ◽  
Author(s):  
Martin Nienhaus
Keyword(s):  
Analyst Forecasts ◽  
Financial Accounting ◽  
Asset Sales ◽  
Accounting Standard ◽  
Earnings Expectations ◽  
Equity Incentives ◽  
Manager Behavior ◽  
Substantial Decline ◽  
The Cost ◽  
New Evidence

AbstractThis study provides plausible causal evidence on the effect of executive equity incentives on opportunistic manager behavior. I exploit a unique setting created by the introduction of Financial Accounting Standard (FAS) 123R in 2005, which led to an exogenous increase in the cost of option pay, causing a substantial decline in option pay for some firms while leaving others largely unaffected. Using difference-in-differences analyses with a treatment group of firms that show a decline in option pay and two control groups, I find that the likelihood of a treatment firm meeting or beating analyst forecasts decreases by 14–20%. The results show that the relatively high levels of meet-or-beat before FAS 123R were largely driven by real activities manipulation such as abnormal asset sales and sales manipulation to beat analysts’ benchmarks, while accrual manipulation and analyst management were less relevant. Together, the results suggest that equity incentives encourage opportunistic actions to meet or beat earnings expectations, and a decline in option pay results in a decline in earnings management to meet earnings expectations.

Sinking Funds and the Cost of Corporate Debt

1979 ◽  
Vol 34 (4) ◽  
pp. 887-893 ◽  
Author(s):  
EDWARD A. DYL ◽  
MICHAEL D. JOEHNK
Keyword(s):  
Corporate Debt ◽  
The Cost

CEO Equity Incentives and Financial Misreporting: The Role of Auditor Expertise

2014 ◽  
Vol 90 (1) ◽  
pp. 321-350 ◽  
Author(s):  
Sudarshan Jayaraman ◽  
Todd Milbourn
Keyword(s):  
Natural Experiment ◽  
Critical Role ◽  
Detection Mechanism ◽  
Equity Incentives ◽  
Industry Expert ◽  
Financial Misreporting ◽  
The Cost ◽  
Detection Mechanisms ◽  
Arthur Andersen

ABSTRACT Prior studies find inconsistent evidence regarding the effect of CEO equity incentives on financial misreporting. We argue that this inconsistency stems from not considering detection mechanisms that mitigate the effect of equity incentives on misreporting by limiting the ability of managers to carry out such manipulative activities. Using auditor industry expertise as one such detection mechanism, we document that CEO equity incentives are positively associated with misreporting only in subsamples where auditor expertise is low, but not where expertise is high. The implication of these results is that auditor expertise lowers the cost of granting equity-based incentives and that firms audited by an industry expert grant their CEOs greater equity incentives. We find strong evidence in favor of this implication. Controlling for previously identified determinants of CEO equity incentives, we find that firms audited by an industry expert grant their CEOs 14 percent more equity incentives than firms audited by a non-expert. To address endogeneity concerns, we use the collapse of Arthur Andersen as a quasi-natural experiment and find analogous evidence. Overall, our study documents the critical role of detection mechanisms in the link between CEO contracting and financial misreporting.

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