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...

This paper examines whether and how auditors are disciplined for audit errors. Taking advantage of the long history of auditor identity data from China, we find that signing auditors with client restatements are likely to lose the privilege of signing the audit reports of public clients....

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...

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...

This paper examines whether and how individual auditors are disciplined for audit errors. Taking advantage of the long history of auditor identity data from China, we find that signing auditors with client restatements are likely to lose the privilege of signing the audit reports of public...