Theoretical and empirical studies argue that managerial hoarding of negative firm-specific information can result in large negative stock price corrections once the accumulated information is revealed. A managerial labor market with tournament-like progression provides managers with the...

In the aftermath of the 2007-2008 financial crisis, flawed variable pay structures of executives were blamed by many for contributing to the build-up of the global financial turmoil, as they allegedly incentivized them to engage in excessive risk-taking. Legislators around the globe decided to...

Executive pay has become a regulatory flashpoint of the global financial crisis. In contrast to the traditional non-interventionist approach to executive compensation, it has galvanized regulators around the world to search for effective responses to the perceived problem of executive pay. These...

This paper examines the relationship between executive cash compensation and company performance for a sample of large UK companies, focusing in particular on the financial services industry, since incentive misalignment has been blamed as one of the factors causing the global financial crisis...

We develop a model in which firms in financial distress design executive compensation contracts, hire and fire executives, and accept or reject government bailout funds that (if accepted) constrain the design of future compensation contracts. Using data from COMPUSTAT and ExecuComp (1992-2007)...

This article considers the regulation “on the books” of executive pay across the EU and the evidence “in action” on corporate practice concerning executive pay (based on disclosures by FTSE Eurofirst 300 companies) in relation to the best practice recommendations set out in two key...

Audits provide monitoring for investors. The collapse of markets across the financial crisis made assets more difficult to value, which increased risk for auditors. The money markets were at the center of the financial crisis increasing audit engagement risk on money market funds, which at the...

This paper demonstrates that executive compensation convexity, measured as the sensitivity of managerial equity compensation portfolios to stock volatility, predicts firm-specific crashes. A bottom-to-top decile change in compensation convexity results in a 21% increase in a firm's crash risk...

The recent financial crisis has led to a vigorous debate about the pros and cons of fair-value accounting (FVA). This debate presents a major challenge for FVA going forward and standard setters’ push to extend FVA into other areas. In this article, we highlight four important issues as an...

The recent financial crisis has led to a major debate about fair-value accounting. Many critics have argued that fair-value accounting, often also called mark-to-market accounting, has significantly contributed to the financial crisis or, at least, exacerbated its severity. In this paper, we...