We provide a detailed analysis of 4,103 compensation clawback provisions used by S&P 1,500 firms from 2000–2013. The adoption and breadth of a clawback provision are related to the scope for executive malfeasance, compensation-related reasons to misrepresent performance; and firm governance....

Panel OLS and GMM-IV estimates indicate that executives respond to the adoption of a compensation clawback provision by decreasing firm risk. The mechanisms that transmit incentives to decisions and decisions to risk appear to be more conservative investment and financial policies and preemptive...

Many of the events that trigger clawback provisions are associated with risky corporate policies and variable performance outcomes. We propose and test the hypothesis that clawback provisions motivate managers to reduce firm risk. Panel OLS, GMM-IV, and PSM models all indicate that clawback...