Management scholars are beginning to provide empirical evidence that organization identity (OI) can be a powerful means of reducing agency costs. We examine whether an individual's identity with the firm influences the agency costs associated with incentive contracts, namely earnings...

We examine whether firms with managers that have prior internal audit experience are less likely to manage earnings. We find that firms with managers that have internal audit experience are associated with less overall earnings management, driven by lower real earnings management. Importantly,...

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...

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...

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...

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...

Increasingly, shareholders and regulators have been calling for a reigning in of executive salaries. Most of this discussion has focused on bonuses and stock options, the more observable portions of an executive compensation package. However long term incentive pay, such as supplemental...

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...

This paper analyzes the impact of agents' risk aversion and other agency parameters on optimal bias in the performance measures used for incentive contracts. Prior research has shown that the limited liability of the agent results in a demand for accounting systems that are stringent compared to...