scholarly journals Pay performance sensitivity and earnings restatements

2014 ◽  
Vol 11 (3) ◽  
pp. 273-293
Author(s):  
Surjit Tinaikar ◽  
Kun Yu
Keyword(s):  
Earnings Management ◽  
Institutional Ownership ◽  
Public Confidence ◽  
Accounting Earnings ◽  
Compensation Contracts ◽  
Earnings Restatements ◽  
Cash Compensation ◽  
The Board Of Directors ◽  
Earnings Restatement

We examine whether the board of directors adjusts the sensitivity of CEO compensation to earnings following an earnings restatement. Using a sample of 598 restating firms and 2,065 non-restating firms during the period of 1995-2011, we find that firms decrease the sensitivity of cash compensation to accounting earnings after restatements and that this decrease is more pronounced for firms that appoint new CEOs after restatements than those whose CEOs continue to remain in office after restatements. Furthermore, the results suggest that the decrease in the sensitivity of cash compensation to earnings for restating firms with new CEOs is more pronounced for firms with a higher level of institutional ownership. This highlights the monitoring role of institutional investors in the redesign of compensation contracts following restatements. Overall, our results are consistent with the argument that the board adjusts the sensitivity of cash compensation to earnings downwards following restatements to constrain earnings management and recover public confidence in the firm.

Board of Director Characteristics, Institutional Ownership, and Fraud: Evidence from Australia

2004 ◽  
Vol 23 (2) ◽  
pp. 105-117 ◽  
Author(s):  
Vineeta D. Sharma
Keyword(s):  
Research Evidence ◽  
Institutional Ownership ◽  
Board Of Director ◽  
Composition And Structure ◽  
High Incidence ◽  
The Board Of Directors ◽  
Director Characteristics ◽  
The Relationship ◽  
The U.S

Due to the high incidence of fraud in Australia, regulatory reports suggest strengthening the monitoring role of the board of directors (BOD). These reports recommend greater independence and no duality (chairperson of the BOD should not be the CEO) on the BOD. While there is no Australian evidence, research evidence in the U.S. supports these suggested reforms. It is not clear whether the research evidence observed in the U.S. will generalize to the Australian setting because of contextual differences. This study extends the U.S. findings to the Australian context and investigates the relationship between two attributes of the BOD, independence and duality, and fraud. In addition, I examine whether institutional ownership plays a role in the context of fraud. The more highly concentrated institutional ownership in Australia suggests the presence of some relationship. Using a matched sample of fraud and no-fraud firms from 1988–2000, I find that as the percentage of independent directors and the percentage of independent institutional ownership increases, the likelihood of fraud decreases. As expected, the results show a positive relationship between duality and the likelihood of fraud. These results support the call for strengthening the composition and structure of the BOD in Australia.

Determinants of CEO Pay: A Comparison of ExecuComp and Non-ExecuComp Firms

2010 ◽  
Vol 85 (5) ◽  
pp. 1511-1543 ◽  
Author(s):  
Brian Cadman ◽  
Sandy Klasa ◽  
Steve Matsunaga
Keyword(s):  
Executive Compensation ◽  
Stock Returns ◽  
Institutional Ownership ◽  
Stock Option ◽  
Ownership Concentration ◽  
Positive Relation ◽  
Stock Liquidity ◽  
Compensation Contracts ◽  
Cash Compensation ◽  
Ceo Pay

ABSTRACT: We document that firms included in the ExecuComp database tend to be larger, more complex, followed by more analysts, have greater stock liquidity levels, and have higher total, but less concentrated, institutional ownership than other firms. Based on these differences, we test and find support for three predictions. First, ExecuComp firms rely more heavily on earnings and stock returns in determining CEO cash compensation. Second, the weight on earnings is more sensitive to differences in the extent of growth opportunities for ExecuComp firms. Third, the positive relation between institutional ownership concentration and the value of stock option grants is stronger for ExecuComp firms. Overall, our results suggest that ExecuComp and non-ExecuComp firms operate in different contracting environments that lead to differences in the design of their executive compensation contracts. As a result, care should be taken in extending results based on ExecuComp samples to non-ExecuComp firms.

scholarly journals Analisis Struktur Kepemilikan dan Good Corporate Governance terhadap Manajemen Laba pada Perusahaan di Bursa Efek Idonesia

2021 ◽  
pp. 220-225
Author(s):  
Jova Yolanda ◽  
Dian Efriyenti
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Board Of Directors ◽  
Audit Committee ◽  
Stock Exchange ◽  
Management Practice ◽  
Institutional Ownership ◽  
Audit Committees ◽  
Good Corporate Governance ◽  
The Board Of Directors

Earnings management practice is the decision to choose a particular accounting method that can achieve the goal of increasing reported profits or reducing investment losses. Misappropriation of financial statements by management can affect the amount of reported income. This study aims to determine whether ownership structure and good corporate governance have a significant influence on earnings management. The study was conducted on pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange (IDX) in a row for the 2016-2020 period. The sample technique used is purposive sampling, so as many as 7 samples of companies are used. The data testing method uses multiple linear analysis. The results of the data test show that partially institutional ownership has a negative and significant effect on earnings management, independent commissioners, the audit committee, and the board of directors has a negative but not significant effect on earnings management. Simultaneously the results state that institutional ownership, independent commissioners, audit committees, and the board of directors have an effect but not significantly on earnings management.

FAKTOR-FAKTOR YANG MEMPENGARUHI MANAJEMEN LABA PADA PERUSAHAAN SUB SEKTOR OTOMOTIF DAN KOMPONEN YANG TERDAFTAR DI BURSA EFEK INDONESIA (Periode 2010-2015)

2016 ◽  
Vol 6 (2) ◽  
pp. 11
Author(s):  
Syarifah Rabi’ah Andawiyah ◽  
Astri Furqani
Keyword(s):  
Earnings Management ◽  
Board Of Directors ◽  
Audit Committee ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Institutional Ownership ◽  
Economic Benefits ◽  
Audit Committees ◽  
Return On Assets ◽  
The Board Of Directors

Earnings management in a practical level is the deliberate actions carried out by the company's management to affect earnings in the process of preparation of financial statements that are used to assess a company and usually management provides information about the economic benefits which were not experienced by the company for personal purposes as well as to increase the value of the company. This study aimed to examine the effect of the Return on Assets (ROA), institutional ownership, the percentage of public shares, the board of directors, audit committees and leverage partially or simultaneously on earnings management during the period 2010-2015. The population in this study is a sub company's automotive sector and the components listed in the Indonesia Stock Exchange by using purposive sampling method. Data were analyzed using multiple linear regression analysis. The results of hypothesis shows that (1) partially there is influence between the Return on Assets (ROA), commissioners and leverage to earnings management, but there is no influence between institutional ownership, the percentage of public shares and the audit committee on earnings management (2) is simultaneously a influence between the return on Assets (ROA), institutional ownership, the percentage of public shares, the board of directors, audit committees and leverage to earnings management.Keywords: earnings management, Return on Assets (ROA), institutional ownership, the percentage of public shares, the board of directors, audit committee, leverag

Earnings Management and Institutional Ownership in Turkey

2018 ◽  
pp. 252-272
Author(s):  
Aslı Aybars ◽  
Levent Ataünal
Keyword(s):  
Earnings Management ◽  
Institutional Investors ◽  
Management Practices ◽  
Reporting Quality ◽  
Institutional Ownership ◽  
External Control ◽  
Corporate Managers ◽  
Opportunistic Management

Earnings management is an important factor that considerably affects the reporting quality of firms and conceivably results in suboptimal investor decisions. The presence of active institutional investors among the equity holders is generally accepted as an external control mechanism that moderates earnings management problems. This chapter aimed to evaluate the role of institutional investors on earnings management with a data of firms listed on Borsa Istanbul between 2005 and 2011. The study found a significant and negative relation between institutional ownership level and managerial discretion exercised in opportunistic management of accruals and confirmed the substantial role played by institutional investors in monitoring and disciplining corporate managers. In other words, the managers' tendency for earnings management practices is observed to be mitigated by institutional shareholdings.

Whose cash compensation has more influence on real earnings management, CEOs or CFOs?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Radwan Alkebsee ◽  
Adeeb A. Alhebry ◽  
Gaoliang Tian
Keyword(s):  
Earnings Management ◽  
Least Squares ◽  
Real Earnings Management ◽  
Least Squares Regression ◽  
Content Type ◽  
Equity Compensation ◽  
Cash Compensation ◽  
Management Literature ◽  
The Relationship

PurposeScholars have investigated the association between executives' incentives and earnings management. Most of the extant literature focuses on equity executives' incentives, while most of the earnings management literature focuses on accrual earnings management (AEM), not real earnings management (REM). This paper investigates the association between chief executive officers’ (CEOs) and chief financial officer (CFOs) cash compensation and REM and explores who has more influence on REM, the CEO or the CFO.Design/methodology/approachThe authors use the data of all listed companies on the Shanghai and Shenzhen Stock Exchanges for the period from 2009 to 2017 and ordinary least squares regression as a baseline model and the Chow test to capture whether the CEO's or the CFO's cash compensation has more influence on REM. To address potential endogeneity issues, the authors use a firm-fixed effect technique and two-stage least squares regression.FindingsThe authors find that CEOs' and CFOs' cash compensation is significantly associated with REM, suggesting that paying non-equity compensation to the CEO and CFO is negatively associated with REM. The authors also find that the CFO's cash compensation has a more significant influence on REM than the CEO's cash compensation, suggesting that the CFO's accounting and financial knowledge strengthens his or her power on the quality of financial reporting.Practical implicationsThe study contributes to the literature of agency and contract theories by using cash-based compensation to provide strong evidence that CEO's and CFO's compensation is associated with REM. It also contributes to the earnings management literature by examining the effect of CEOs' and CFOs' cash compensation on earnings management using proxies for REM-related activities. The study also contributes to the institutional theory by providing empirical evidence on the governance role of executives' cash compensation in deterring REM. Finally, it is the first to examine the relationship between CEO's and CFO's cash compensation and REM, and the first to explore who is more influential regarding REM in emerging markets, the CEO or the CFO.Originality/valueAs a response to the call for investigations of the role of non-equity-based compensation in earnings management and the call to consider non-developed institutional contexts in governance research, this study extends prior studies by providing novel evidence on the relationship between CEOs' and CFOs' non-equity compensation and REM in China's emerging market. The study documents that the CFO has a greater influence on REM than the CEO does.

CFO/CEO-Board Social Ties, Sarbanes-Oxley, and Earnings Management

2011 ◽  
Vol 25 (3) ◽  
pp. 537-557 ◽  
Author(s):  
Gopal V. Krishnan ◽  
K. K. Raman ◽  
Ke Yang ◽  
Wei Yu
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Social Ties ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Board Independence ◽  
Sarbanes Oxley ◽  
Time Period ◽  
The Board Of Directors

SYNOPSIS Prior research suggests that the efficacy of a formally independent member of the board of directors could be undermined by social ties with the CEO. In this study, we examine the relation between CFO/CEO-board social ties and earnings management over the 2000–2007 time period. Our results suggest that CFOs/CEOs picked more socially connected directors in the post-Sarbanes-Oxley Act (SOX) time period (possibly as a way out of the mandated independence requirements). Our results also suggest a positive relation between CFO/CEO-board social ties and earnings management. Still, the increase in managerial/board risk aversion since SOX appears to have negated the effect of social ties on earnings management in the post-SOX period. Board independence and financial reporting quality remain topics of ongoing interest. The study is important in advancing our understanding of the role of social ties in earnings management.

The role of CFO power: Monitor or collusion——Evidence from China

2021 ◽  
pp. 002072092098370
Author(s):  
Yubin Gao ◽  
Ju Mao ◽  
Lingge Zhao
Keyword(s):  
Earnings Management ◽  
Private Enterprises ◽  
Earnings Manipulation ◽  
Compensation Contracts ◽  
Sample Group ◽  
Chinese Context ◽  
Inhibition Effect ◽  
Empirical Results ◽  
Agency Conflict

In combination with the unique cultural and institutional background of China, this paper puts forward the measurement of CFO power in the Chinese context, and systematically analyzes and tests the role of CFO power. The empirical results show that the greater the power of CFO, the lower the degree of earnings management of the company, indicating that the power of CFO is more of a supervisory role, rather than collusion with the CEO due to interests binding. And the inhibition effect only exists in the sample group of private enterprises. Moreover, the supervision role of CFO power only exists in companies with high robustness and severe agency conflict, which shows that CFO reduces their company's earnings manipulation based on their own conservation and by suppressing opportunism. In addition, CFO power helps improve the effectiveness of their own compensation contracts.

scholarly journals The role of institutional shareholders in the relationship between unconditional conservatism and earnings management

2021 ◽  
Vol 19 (1) ◽  
pp. 94-104
Author(s):  
Raffaela Casciello ◽  
Marco Maffei ◽  
Fiorenza Meucci
Keyword(s):  
Earnings Management ◽  
Institutional Ownership ◽  
Previous Literature ◽  
Accounting Conservatism ◽  
Real Earnings Management ◽  
Conditional Conservatism ◽  
Institutional Shareholders ◽  
The Impact ◽  
The Relationship

This study investigates whether and how institutional shareholders affect the relation between unconditional conservatism and earnings management. We analyze the relation between unconditional conservatism and accrual-based earnings management and the relation between unconditional conservatism and real earnings management, focusing on the role of the institutional shareholders variable in these two relations. First, we find evidence of positive (negative) relations between unconditional conservatism and accrual-based (real) earnings management. Second, we demonstrate that the presence of institutional shareholders has a mitigating (amplifying) impact on the relation between unconditional conservatism and accrual-based (real) earnings management. This study contributes to enrich the previous literature in two ways. First, it extends the strand of research on the relation between accounting conservatism and earnings management (Garcìa Lara, García Osma, & Penalva, 2020; Chen, Hemmer, & Zhang, 2007; Gao, 2013), focusing on unconditional conservatism since it is less prevalent than conditional conservatism in previous literature (Ruch & Taylor, 2015). Second, it extends the strand of research on the impact of institutional ownership on accounting practices (Farooq & El Jai, 2012; Sakaki, Jackson, & Jory, 2017), highlighting the role of the institutional shareholders in the relation between unconditional conservatism and earnings management

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