In the presence of managerial short-termism and asymmetric information about skill and effort provision, firms may opportunistically shift earnings from uncertain to more certain times. We document that firms report more negative discretionary accruals when financial markets are less certain...

Prior research argues that a manager whose wealth is more sensitive to changes in the firm's stock price has a greater incentive to misreport. However, if the manager is risk-averse and misreporting increases both equity values and equity risk, the sensitivity of the manager's wealth to changes...

This study examines whether the equity incentives of the CFO are associated with earnings management. Prior research investigates delta and vega for the average of the top five executives on the firm’s financial misreporting. The top 5 executives variable most likely captures the culture of...

Performance-based pay is an important instrument to align the interests of managers with the interests of shareholders. However, recent evidence suggests that high-powered incentives also provide managers with incentives to manipulate the firm's reported earnings. The previous literature has...

In this paper, we investigate whether budgets ratchet. Using business-unit data from a large multinational corporation, we find evidence consistent with ratcheting where favorable budget variances result in performance budget increases that are larger than decreases associated with unfavorable...

In recent years, companies have begun to voluntarily disclose alternative measures of CEO compensation. These figures differ — sometimes significantly — from those reported in the summary compensation tables of the annual proxy. The motivation to report this information, however, is not...

We investigate the association between risk-taking incentives provided by stock-based compensation arrangements and non-GAAP financial disclosures. Controlling for compensation to stock price sensitivity, we find that managers with higher compensation to stock volatility sensitivity (vega) are...

Despite a strong plea for integrating sustainability goals into traditional corporate bonus schemes, a comprehensive implementation of these systems has been lacking until recently. This article explores four illustrative cases from the Netherlands, where several multinationals started to...

Enron's collapse is generally viewed as a morality tale - the natural result of managerial greed, a clueless board, and feckless gatekeepers. But none of these aspects of the story clearly distinguishes Enron from other major firms during the bubble era of the late 90s. This material identifies...

This paper studies the impact of tightening accounting standards on an impatient manager's long-term investment decisions under earnings based performance evaluation. We analyze how the manager's possibility to influence current earnings will affect his investment decision-making. We examine a...