What Does CEOs’ Pay-for-Performance Reveal About Shareholders’ Attitude Toward Earnings Overstatements?

What Does CEOs’ Pay-for-Performance Reveal About Shareholders’ Attitude Toward Earnings... If overstatements were a symptom of the agency conflict, pay-for-performance sensitivities should have increased in response to the additional penalties for misreporting imposed by SOX. Our finding of their decrease is inconsistent with the view that overstatements were an unintended consequence of incentive pay prior to 2002. To corroborate our interpretation, we show that (i) CEO pay-for-performance sensitivities are higher among firms whose shareholders stand to benefit from overstatements; (ii) this cross-sectional relationship weakens significantly after SOX; and (iii) the within-firm decrease in pay-for-performance sensitivity is most pronounced among firms with high pre-SOX shareholder benefits from overstatements. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Ethics Springer Journals

What Does CEOs’ Pay-for-Performance Reveal About Shareholders’ Attitude Toward Earnings Overstatements?

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Springer Netherlands
Copyright © 2015 by Springer Science+Business Media Dordrecht
Philosophy; Ethics; Business and Management, general; Management; Business Ethics; Quality of Life Research
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