We present evidence that managerial responses to voluntary clawback adoptionsdepend on compensation incentives that can induce capital investment mix shifts and reducecapital investment efficiency. Specifically, we find that managers incentivized by high levels ofperformance-based pay and...

To deter financial misstatements, many companies have recently adopted compensation recovery policies – commonly known as “clawbacks” – that authorize the board to recoup compensation paid to executives based on misstated financial reports. Clawbacks have been shown to reduce financial...

While firm-initiated compensation recovery (or clawback) provisions are gaining popularity and the recently enacted Dodd-Frank Act seeks to make the clawback of erroneously awarded compensation mandatory for all listed companies, little is known about their effectiveness. We find that the...

We introduce some new econometric tests and techniques for identifying and overcoming the problem of weak instruments in the context of joint provision of audit and non-audit fees. We use this context because identifying appropriate instruments is difficult due to the lack of theoretical...

Although firm-initiated clawbacks reduce accounting manipulation, they also induce managers to engage in suboptimal activities (e.g., reduce research and development (R&D) expenses) to achieve earnings targets. To assess the effectiveness of clawback provisions, we examine their impact from...

Although firm-initiated clawbacks reduce accounting manipulation, they also induce managers to engage in sub-optimal activities (e.g., reduce R&D) to achieve earnings targets. To assess the effectiveness of clawback provisions, we examine their impact from debtholders' point of view. We find...