We find a positive relation between ownership by institutions with active strategies and short investment horizons (transient institutions) and the occurrence and magnitude of financial restatements. Even ownership by institutions with enhanced incentives to monitor does not attenuate...

This paper examines the effect of CEO compensation contracts on misreporting. We find that the sensitivity of the CEO's option portfolio to stock price is significantly positively related to the propensity to misreport. We do not find that the sensitivity of other components of CEO compensation,...

Several recent papers document that the magnitude of potential gains from stock-based compensation is positively related to the likelihood of misreporting. In a sample of firms that announce restatements of their financial statements from 1997 to 2002, we examine whether managers realize these...

We find that the likelihood and severity of financial misreporting is positively related to aggregate institutional ownership and this effect can be largely attributed to ownership by institutions with short investment horizons -- those with little incentive to engage in costly monitoring of...