nach oben

Review of Quantitative Finance and Accounting

Erschienen in:

01.07.2010 | Original Research

Executive compensation, earnings management and shareholder litigation

verfasst von: Robert A. Jones, Yan Wendy Wu

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 1/2010

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This paper examines the effects of executive compensation and potential for earnings management on the incidence of shareholder class action lawsuits and their outcomes. Although damage measurement factors, managerial option intensity, and earnings management all significantly affect the probability of lawsuits, they differ in their influence on the likelihood of positive settlement and on settlement amount: Damage factors do not affect the likelihood of settlement versus dismissal. High option intensity raises the probability of positive settlement, but does not affect its amount. High earnings management, on the other hand, does not affect the likelihood of settlement, but does increase settlement amount. These findings suggest that factors typically used to explain shareholder lawsuits should be interpreted with care.

Nächster Artikel Heterogeneous institutional investors and CEO compensation

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

See Johnson et al. (2007) and Choi (2007) for two cases of opposite empirical evidence.

Given our data only contains S&P 1,500 companies, this suggests that while the sample may do well in capturing SCALs of large, medium and small firms, it probably is not representative of the micro-firms.

Due to the double counting of Nasdaq trading data. For Nasdaq companies, daily trading volume is adjusted by dividing the CRSP trading volume data by 2.

The constant term is included in the regressions of Tables 6, 7, 8 but is omitted for space reasons.

Alexander JC (1991) “Do the Merits Matter?” A study of settlement in securities class actions. Stanf Law Rev 43:497–598CrossRef

Baber W, Janakiraman S, Kang S (1996) Investment opportunities and the structure of executive compensation. J Account Econ 21:297–318CrossRef

Bauman MP, Shaw KW (2006) Stock option compensation and the likelihood of meeting analysts’ quarterly earnings targets. Rev Quant Financ Account 26:301–319CrossRef

Beck JD, Bhagat S (1997) Shareholder litigation: share price movements, news releases, and settlement amounts. Manag Decis Econ 18:563–586CrossRef

Beneish MD (1997) Detecting GAAP violation: implications for assessing earnings management among firms with extreme financial performance. J Account Public Policy 16:235–250CrossRef

Benmelech E, Kandel E, Veronesi P (2008) Stock-based compensation and CEO (Dis)incentives. NBER Working Paper Series, Working Paper 13732, http://www.nber.org/papers/w13732

Bergstresser D, Philippon T (2006) CEO incentives and earnings management. J Financ Econ 80:511–529CrossRef

Black F, Scholes M (1973) The pricing of options and corporate liabilities. J Political Econ 81:637–654CrossRef

Burns N, Kedia S (2006) The impact of performance-based compensation on misreporting. J Financ Econ 79:35–67CrossRef

Cheng Q, Warfield T (2005) Equity incentives and earnings management. Account Rev 80:441–476CrossRef

Choi SJ (2007) Do the merits matter less after the private securities litigation reform act? J Law Econ Org 23(3):598–626CrossRef

Core J, Guay W (2002) Estimating the value of employee stock option portfolios and their sensitivieies to price and volatility. J Account Res 40:613–630CrossRef

Crocker KJ, Slemrod J (2007) The economics of earnings manipulation and managerial compensation. Rand J Econ 38(No.3):698–713

Dechow P, Sloan R, Sweeney A (1995) Detecting earnings management. Account Rev 70:193–226

Dechow P, Sloan R, Sweeney A (1996) Causes and consequences of earnings manipulation: an analysis of firms subject to enforcement actions by SEC. Contemp Account Res 13:1–36CrossRef

Denis DJ, Hauouna P, Sarin A (2006) Is there a dark side to incentive compensation? J Corp Financ 12:467–488CrossRef

DuCharme L, Malatesta P, Sefcik S (2004) Earnings management, stock issues, and shareholder lawsuits. J Financ Econ 71:27–49CrossRef

Efendi J, Srivastava A, Swanson E (2007) Why do corporate managers misstate financial statements? The role of option compensation and other factors. J Financ Econ 85:667–708CrossRef

Erickson M, Hanlon M, Maydew E (2006) Is there a link between executive equity incentives and accounting fraud? J Account Res 44:113–143CrossRef

Gaver J, Gaver K (1993) Additional evidence on the association between the investment opportunity set and corporate financing, dividend, and compensation policies. J Account Econ 16:125–160CrossRef

Goldman E, Slezak SL (2006) An equilibrium model of incentive contracts in the presence of information manipulation. J Financ Econ 80:603–626CrossRef

Grundfest JA (1995) Why disimply? Harvard Law Rev 108:740–741CrossRef

Haugen R, Senbet L (1981) Resolving the agency problems of external capital through options. J Financ 36:629–648CrossRef

Hribar P, Collins D (2002) Errors in estimating accruals: implications for empirical research. J Account Res 40(No. 1):105–134CrossRef

Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76:323–329

Jensen MC, Meckling W (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 3:305–360CrossRef

Jensen MC, Murphy KJ (1990) Performance pay and top-management incentives. J Political Econ 98:225–264CrossRef

Johnson M, Nelson K, Pritchard A (2007) Do the merits matter more? The impact of the private securities litigation reform act. J Law Econ Organ 23(3):627–652CrossRef

Jones J (1991) Earnings management during import relief investigations. J Account Res 29:193–228CrossRef

Kothari S, Leone A, Wasley C (2005) Performance matched discretionary accrual measures. J Account Econ 39:163–197CrossRef

LeClere M (1992) The interpretation of coefficients in models with qualitative dependent variables. Decis Sci 23:770–776CrossRef

Niehaus G, Roth G (1999) Insider trading, equity issues, and CEO turnover in firms subject to securities class action. Financ Manag 28 4:52–72CrossRef

Peng L, R¨oell A (2008) Executive pay and shareholder litigation. Rev Financ 12:141–184CrossRef

Smith C, Watts W (1992) The investment opportunity set and corporate financing, dividend and compensation policies. J Financ Econ 32:263–292CrossRef

Vafeas N (1999) Board meeting frequency and firm performance. J Financ Econ 52:113–142CrossRef

Vafeas N, Waegelein JF (2007) The association between audit committees, compensation incentives, and corporate audit fees. Rev Quant Financ Acc 28:241–255CrossRef

Titel: Executive compensation, earnings management and shareholder litigation
verfasst von: Robert A. Jones
Yan Wendy Wu
Publikationsdatum: 01.07.2010
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 1/2010
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-009-0150-y

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 1/2010

Issuers’ incentives and tests of Baron’s model of IPO underpricing

Heterogeneous institutional investors and CEO compensation

On the validity of the augmented Fama and French’s (1993) model: evidence from the Hong Kong stock market

A new paradigm for forecasting security returns in a market regulated by price limits

Bootstrap refinements in tests of microstructure frictions