Internal Governance and Corporate Fraud

2021 ◽  
pp. 0148558X2098738
Author(s):  
Jongmoo Jay Choi ◽  
Yuanzhi Li ◽  
Oded Shenkar ◽  
Jian Zhang
Keyword(s):  
Fixed Effects ◽  
Cost Benefit ◽  
Supporting Evidence ◽  
Matched Sample ◽  
Corporate Fraud ◽  
Internal Governance ◽  
Negative Relation ◽  
Collective Activity ◽  
Ceo Pay ◽  
Variable Analysis

This article examines whether internal governance in the form of managerial dissent between the CEO and subordinate executives reduces fraud likelihood. We model fraud as a rational decision in a cost–benefit framework and a collective activity by all executives. The model predicts a negative relation between dissent and fraud occurrence. We use three measures for higher dissent: a larger fraction of subordinates having joined the firm prior to the CEO, a lower CEO pay slice, and a smaller difference in pay performance sensitivity between the two; and find supporting evidence. We address endogeneity concerns by including firm-fixed effects, constructing a propensity score–matched sample, and conducting instrument variable analysis. We also find that fraud duration is negatively related to dissent.

CEO Compensation in Japan: Why So Different from the United States?

2018 ◽  
Vol 53 (5) ◽  
pp. 2261-2292
Author(s):  
Luyao Pan ◽  
Xianming Zhou
Keyword(s):  
United States ◽  
Ceo Compensation ◽  
Direct Evidence ◽  
Level Structure ◽  
Chief Executive ◽  
The United States ◽  
Incentive Contracts ◽  
Matched Sample ◽  
Director Compensation ◽  
Ceo Pay

In Mar. 2010, Japan’s financial regulator implemented the country’s first legislation concerning the disclosure of director compensation for named individuals. Using the first publicly available data for Japanese executives, we document direct evidence on the level, structure, and mechanisms of chief executive officer (CEO) compensation in Japan and perform a matched-sample comparison between Japan and the United States. In contrast to the findings of recent studies showing that international differentials in CEO pay have largely disappeared since the mid-2000s, our results show strikingly large differences between the Japanese and American systems that are difficult to explain by differences in conventional incentive contracts.

A latent variable analysis of corporate social responsibility and firm value

2018 ◽  
Vol 44 (4) ◽  
pp. 478-494 ◽  
Author(s):  
Boonlert Jitmaneeroj
Keyword(s):  
Firm Value ◽  
Measurement Errors ◽  
Latent Variable ◽  
Fixed Effects ◽  
Latent Variable Model ◽  
Variable Model ◽  
Content Type ◽  
Latent Variable Analysis ◽  
Corporate Social ◽  
Variable Analysis

Purpose Corporate social responsibility (CSR) has several dimensions that are inherently unobservable or measured with errors. Due to measurement errors of CSR proxies, regression analysis seems inappropriate for investigating the relationship between CSR and firm value. Accounting for CSR measurement errors, the purpose of this paper is to use a latent variable analysis to examine whether CSR affects firm value. Design/methodology/approach This study applies a latent variable model that directly takes into account the measurement errors of CSR proxies. Moreover, the inclusion of firm-fixed effects in the model controls for time-invariant unobservable firm-specific characteristics that may drive both CSR and firm value. CSR is measured by environmental, social, and corporate governance activities. Findings Based on data of US firms between 2002 and 2014, this study finds conflicting evidence of a direct association between each CSR proxy and firm value. When all CSR proxies are incorporated into a latent variable model, CSR significantly positively impacts firm value. Therefore, CSR strategies based on a single measure of CSR or the equal weighting of CSR measures tend to underestimate the influence of CSR on firm value. Practical implications Corporate managers should enhance firm value by simultaneously engaging in environmental, social, and corporate governance activities because there is a synergistic effect with firm value. Furthermore, investors who downplay CSR factors in firm valuation can lead to significant errors in making equity investment choices. Originality/value This study presents a novel examination of the price-earnings ratio in the CSR valuation by using the latent variable model with firm-fixed effects.

Compensation Consultants and the Level, Composition, and Complexity of CEO Pay

2019 ◽  
Vol 95 (1) ◽  
pp. 311-341 ◽  
Author(s):  
Kevin J. Murphy ◽  
Tatiana Sandino
Keyword(s):  
Fixed Effects ◽  
Conflicts Of Interest ◽  
Data Availability ◽  
The Public ◽  
Say On Pay ◽  
Suggestive Evidence ◽  
Ceo Pay ◽  
The Impact ◽  
Equity Incentive ◽  
Jel Classifications

ABSTRACT We provide fresh evidence regarding the relation between compensation consultants and CEO pay. First, firms that employ consultants have higher-paid CEOs—this result is robust to firm fixed effects and matching on economic and governance variables. Second, while this relation is partly due to consultant conflicts of interest, it is largely explained by the impact consultants have on the composition and complexity of CEO pay plans; notably, this impact fully mediates the consultant-CEO pay relation. Third, firms with higher-paid CEOs and more complex pay plans are more likely to hire a consultant. Last, Say-on-Pay voting patterns suggest shareholders view positively the advice consultants provide, but only when consultants provide no other services. We also find suggestive evidence of boards “layering” new equity incentive plans over existing ones, thereby increasing the impact of composition and complexity on CEO pay beyond the premium the CEO would demand for bearing additional compensation risk. JEL Classifications: J33; M12; M52; M48. Data Availability: Data are available from the public sources cited in the text.

scholarly journals Corporate Fraud, Governance, and Auditing

2012 ◽  
Vol 1 (1) ◽  
pp. 109-133 ◽  
Author(s):  
Marco Pagano ◽  
Giovanni Immordino
Keyword(s):  
Corporate Governance ◽  
Audit Quality ◽  
Managerial Compensation ◽  
Private Benefits ◽  
Firm Level ◽  
Corporate Fraud ◽  
Internal Governance ◽  
Empire Building ◽  
Country Level ◽  
Internal Governance Mechanisms

We analyze corporate fraud in a setting in which managers have superior information but are biased against liquidation because of their private benefits from empire building. This may induce them to misreport information and even bribe auditors when liquidation would be value-increasing. To curb fraud, shareholders optimally design corporate governance by jointly choosing audit quality and managerial compensation. We analyze how country-level rules affect these firm-level choices. Our analysis underscores that different country-level governance provisions have different effects on firm-level governance: Some act as substitutes of internal governance mechanisms, whereas others enhance their effectiveness and therefore complement them. (JEL G28, K22, M42)

Corruption and Corporate Innovation

2019 ◽  
Vol 55 (7) ◽  
pp. 2124-2149 ◽  
Author(s):  
Jesse Ellis ◽  
Jared Smith ◽  
Roger White
Keyword(s):  
Social Welfare ◽  
Ethnic Diversity ◽  
Fixed Effects ◽  
Political Corruption ◽  
The State ◽  
Negative Relation ◽  
Corporate Innovation ◽  
Innovative Firms ◽  
Innovation Output

We examine whether political corruption impedes innovation. Using a comprehensive sample of U.S. firms, we find that corruption has a substantial, negative relation with the quantity and quality of innovation. These results are robust to using various fixed effects, proxies for corruption and innovation, and subsamples. To establish causality, we employ 2 instruments for corruption: local ethnic diversity and the corruption of the state a firm’s founder grew up in. Corruption appears to reduce innovation output both on average and for the most innovative firms. Overall, this evidence is consistent with the notion that corruption reduces social welfare by impeding innovation.

scholarly journals A Cost and Cost-Benefit Analysis of the Stand More AT Work (SMArT Work) Intervention

2020 ◽  
Vol 17 (4) ◽  
pp. 1214 ◽  
Author(s):  
Fehmidah Munir ◽  
Paul Miller ◽  
Stuart J.H. Biddle ◽  
Melanie J. Davies ◽  
David W. Dunstan ◽  
...  
Keyword(s):  
Cost Benefit Analysis ◽  
Work Productivity ◽  
Cost Benefit ◽  
Self Report ◽  
Sitting Time ◽  
Control Group ◽  
Supporting Evidence ◽  
Benefit Analysis ◽  
Usual Practice ◽  
Intervention Cost

This study conducted a cost and cost-benefit analysis of the Stand More AT (SMArT) Work workplace intervention, designed to reduce sitting time. The study was a cluster two-armed randomised controlled trial involving 37 office clusters (146 desk-based workers) in a National Health Service Trust. The intervention group received a height-adjustable workstation with supporting behaviour change strategies. The control group continued with usual practice. Self-report absenteeism, presenteeism and work productivity were assessed at baseline, 3, 6 and 12 months; and organisational sickness absence records 12 months prior to, and 12 months of the intervention. Mean per employee costs associated with SMArT Work were calculated. Absenteeism, presenteeism and work productivity were estimated, and employer-recorded absence data and employee wage-banding were used to provide a human-capital-based estimate of costs to the organisation. The return-on-investment (ROI) and incremental cost-efficacy ratios (ICER) were calculated. Intervention cost was £692.40 per employee. Cost-benefit estimates show a net saving of £1770.32 (95%CI £-354.40, £3895.04) per employee as a result of productivity increase. There were no significant differences in absence data compared to the control group. SMArT Work provides supporting evidence for policy-makers and employers on the cost benefits of reducing sitting time at work.

The Female Audit Fee Premium

2015 ◽  
Vol 34 (4) ◽  
pp. 171-195 ◽  
Author(s):  
Kris Hardies ◽  
Diane Breesch ◽  
Joël Branson
Keyword(s):  
Fixed Effects ◽  
Audit Quality ◽  
Audit Fees ◽  
Data Availability ◽  
Supply Side ◽  
Matched Sample ◽  
Fixed Effects Models ◽  
Audit Fee ◽  
And Behavior ◽  
Supply Side Factors

SUMMARY This study investigates the existence of a female audit fee premium (i.e., higher audit fees for female audit engagement partners). We analyze 57,723 firm-year observations from Belgian firms that were audited by 93 female and 599 male audit partners during the period 2008–2011. The results suggest that client firms pay higher audit fees (by about 7 percent) to female auditors. The findings are confirmed by an array of robustness checks, including a propensity score matched sample, a Heckman two-stage procedure, an examination of a sample of clients that switched audit partners, and fixed effects models. The combined evidence in this study suggests the existence of a female audit fee premium. This fee premium may exist because of gender differences in knowledge, skills, abilities, preferences, and behavior or due to supply-side factors (e.g., a demand for diversity, gendered perceptions about audit quality, or client satisfaction). Data Availability: The data are publicly available from the sources identified in the paper.

scholarly journals Smoking status and subjective well-being

2016 ◽  
Vol 26 (2) ◽  
pp. 195-201 ◽  
Author(s):  
Diana Weinhold ◽  
Frank J Chaloupka
Keyword(s):  
Fixed Effects ◽  
Cost Benefit Analysis ◽  
Smoking Status ◽  
Empirical Support ◽  
Cost Benefit ◽  
Well Being ◽  
Internet Survey ◽  
Subjective Well Being ◽  
Cross Sectional ◽  
Quitting Smoking

Background/aimsA debate is currently underway about the Food and Drug Administration's (FDA's) methods for evaluating antitobacco regulation. In particular, the US government requires a cost-benefit analysis for significant new regulations, which has led the FDA to consider potential lost subjective well-being (SWB) of ex-smokers as a cost of any proposed antitobacco policy. This practice, which significantly limits regulatory capacity, is premised on the assumption that there is in fact a loss in SWB among ex-smokers.MethodsWe analyse the relationship between SWB and smoking status using a longitudinal internet survey of over 5000 Dutch adults across 5 years. We control for socioeconomic, demographic and health characteristics, and in a contribution to the literature, we additionally control for two potential confounding personality characteristics, habitual use of external substances and sensitivity to stress. In another contribution, we estimate panel fixed effects models that additionally control for unobservable time-invariant characteristics.ResultsWe find strong suggestive evidence that ex-smokers do not suffer a net loss in SWB. We also find no evidence that the change in SWB of those who quit smoking under stricter tobacco control policies is different from those who quit under a more relaxed regulatory environment. Furthermore, our cross-sectional estimates suggest that the increase in SWB from quitting smoking is statistically significant and also of a meaningful magnitude.ConclusionsIn sum, we find no empirical support for the proposition that ex-smokers suffer lower net SWB compared to when they were smoking.

scholarly journals The influence of internal and external corporate governance on firm value: Evidence from STOXX® Europe 600 index members

2020 ◽  
Vol 18 (1) ◽  
pp. 152-162
Author(s):  
Patrick Stender ◽  
Joachim Rojahn
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Fixed Effects ◽  
Principal Component ◽  
Internal Governance ◽  
Financial Firms ◽  
External Governance ◽  
Governance Quality ◽  
Corporate Governance Quality ◽  
Biased Estimates

The purpose of this paper is to analyze the influence of different dimensions of corporate governance quality on the valuation of non-financial firms listed in the STOXX® Europe 600 index over a period from 2012 to 2017. Instead of using a single governance measure that may cause biased estimates, we seek to capture a more holistic perspective on corporate governance. Therefore, we recreate a set of the most frequently cited governance scores in the literature on a common database and carry out a principal component analysis to identify similarities between the scores. Results reveal that our corporate governance scores load on two general factors that we identify to represent internal and external governance quality. After constructing composite governance measures for each of these factors, we find that external (internal) governance is positively (negatively) linked with firm valuation when applying both fixed effects and IV regressions to account for endogeneity. Our findings imply that subsequent studies on the governance-firm value relationship need to include proxies for both external and internal corporate governance quality.

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