This study examines the explicit use of relative performance evaluation (RPE) in executive compensation contracts and the selection of RPE peers. Using S&P 1500 firms' first proxy disclosures under the SEC's 2006 executive compensation disclosure rules, we find that about 25 percent of our...

Theory posits that managerial holdings of debt (“inside debt”) align managers' incentives with those of outside debtholders. Executive pensions, which consist of ERISA-qualified rank-and-file (RAF) plans and Supplemental Executive Retirement Plans (SERPs), and other deferred compensation...

Lenders can transfer credit risk by purchasing credit default swaps (CDS), but holding swaps can diminish their incentives to monitor borrowers. Contracting theory predicts that lenders demand conservatism, in particular asymmetric timeliness of loss recognition, to effectively monitor...

Section 403 of the Sarbanes-Oxley Act accelerates the reporting deadline of executive stock option grants to be within two business days after the grants. This study investigates the effect of Section 403 on the extent of CEO influence over grant date stock prices aimed at enhancing the value of...

This study seeks to provide insights into companies' decisions to issue stock options to CEOs on a scheduled or an unscheduled basis. We first document that unscheduled option awards provide CEOs with greater flexibility to influence the grant date stock price that leads to a lower exercise...

We investigate the association between errors in management forecasts of subsequent year earnings and current year accruals. In an uncertain operating environment, managers' assessments of their firms' business prospects are imperfect. Since managers' imperfect business assessments influence...

We study how uniformed traders (defined as strategic traders not endowed with private information) use public disclosure and prices to form beliefs and trade. We manipulate the availability of public forecasts (e.g. earnings forecasts) of forthcoming public signals (e.g., earnings...

Relative performance evaluation (RPE) compensates managers on their relative performance against a peer group. Since observing more peers' performance allows managers to better estimate the performance level required to achieve RPE targets, we conjecture that releasing earnings later than peers...

We investigate the association between errors in management forecasts of subsequent year earnings and current year accruals. In an uncertain operating environment, managers' assessments of their firms' business prospects are imperfect. Since managers' imperfect business assessments influence...

We examine the effect of employment contract horizon on managers' discretion in financial reporting. During the contract horizon, the board learns about a new CEO's ability from realized firm performance and uses this information to determine whether to renew or terminate the CEO's contract....