The Importance Of Reporting Incentives
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The Importance Of Reporting Incentives
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Author : David Burgstahler
language : en
Publisher:
Release Date : 2011
The Importance Of Reporting Incentives written by David Burgstahler and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This paper examines how capital market pressures and institutional factors shape firms' incentives to report earnings that reflect economic performance. To isolate the effects of reporting incentives, we exploit the fact that, within the European Union, privately held corporations face the same accounting standards as publicly traded companies because accounting regulation is based on legal form. We focus on the level of earnings management as one dimension of accounting quality that is particularly responsive to firms' reporting incentives. We document that private firms exhibit higher levels of earnings management and that strong legal systems are associated with less earnings management in private and public firms. We also provide evidence that private and public firms respond differentially to institutional factors, such as book-tax alignment, outside investor protection and capital market structure. Moreover, legal institutions and capital market forces often appear to reinforce each other.
Studies On The Importance Of Incentives And Standards In The Financial Reporting Process
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Author : Urska Kosi
language : en
Publisher:
Release Date : 2010
Studies On The Importance Of Incentives And Standards In The Financial Reporting Process written by Urska Kosi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
This thesis consists of three self-contained studies on the factors affecting the financial reporting process. The first study investigates the role of reporting incentives in private firms. I observe significant decrease in asset -write-offs after an adverse change in tax treatment of write-offs. This change does not affect any other economic incentive to use accounting discretion and thus permits me to disentangle the tax- minimisation incentive from other incentives including debt contracting, dividends and employee relations that cause the anomalous positive relation between write-offs and profitability. I provide new and complementary evidence that tax incentives play an important role in firms' financial reporting behaviour. The second study examines whether mandatory adoption of IFRS affects the source and cost of debt financing. First, I find that mandatory IFRS adopters more likely issue public debt. Second, I show that IFRS adopters pay lower bond yield spreads but there is no significant effect on loan spreads. My findings are consistent with IFRS enhancing the quality and comparability of accounting information, and suggest that mandatory IFRS adoption is beneficial primarily for bond investors. Finally, I find that the positive effects of IFRS are present only in countries with strong institutions and less harmonised accounting standards. The third study investigates whether mandatory IFRS adoption affects credit relevance of accounting information. First, I find significant increase in credit relevance of mandatory IFRS adopters after the adoption. Second, I show that increase in credit relevance after IFRS adoption is greater for IFRS firms than for matched US \ \ firms, Third, I find that IFRS firms exhibit relatively higher credit relevance compared to US firms in the post-adoption period. Additionally, I show that IFRS effects vary between countries. I interpret higher credit relevance of IFRS-based accounting information relative to local standards as an increase in accounting quality from the debtholders' perspective. '.
Cost Of Equity Effects From Mandatory Ifrs Adoption
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Author : Raymond Wai-To Leung
language : en
Publisher:
Release Date : 2013
Cost Of Equity Effects From Mandatory Ifrs Adoption written by Raymond Wai-To Leung and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
The Impact Of Cfos Incentives And Earnings Management Ethics On Their Financial Reporting Decisions
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Author : Cathy Beaudoin
language : en
Publisher:
Release Date : 2014
The Impact Of Cfos Incentives And Earnings Management Ethics On Their Financial Reporting Decisions written by Cathy Beaudoin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Despite regulatory reforms aimed at inhibiting aggressive financial reporting, earnings management persists and continues to concern practitioners, regulators, and standard setters. To provide insight into this practice and how to mitigate it, we conduct an experiment to examine the impact of two independent variables on CFOs' discretionary expense accruals. One independent variable, incentive conflict, is manipulated at two levels (present, absent) - i.e., the presence or absence of a personal financial incentive that conflicts with a corporate financial incentive. The other independent variable is CFOs' earnings management ethics (“EM-Ethics”, high vs. low), measured as their assessment of the ethicalness of key earnings management motivations. We find that incentive conflict and EM-Ethics interact to determine CFOs' discretionary accruals such that (a) in the presence of incentive conflict, CFOs with low (high) EM-Ethics tend to give in to(resist) the personal incentive by booking higher (lower) expense accruals; and (b) in the absence of an incentive conflict, CFOs with low (high) EM-Ethics tend to give in to (resist) the corporate incentive by booking lower (higher) expense accruals. We also find support for a mediated-moderation model in which CFOs' level of EM-Ethics influences their moral disengagement tendencies which, in turn, differentially affect their discretionary accruals, depending on the presence or absence of incentive conflict. Theoretical and practical implications of these findings are discussed.
Earnings Management From The Bottom Up
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Author : Felix Oberholzer-Gee
language : en
Publisher:
Release Date : 2012
Earnings Management From The Bottom Up written by Felix Oberholzer-Gee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
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 focused primarily on Chief Executive Officers, but managers further down in the firm hierarchy-division managers and Chief Financial Officers-- are likely to have similar incentives, and perhaps even greater opportunity to influence reported earnings in a manner that maximizes these managers' personal income. Moreover, previous research focuses on equity incentives and largely ignores other elements of incentive pay. We contribute to this literature by analyzing all forms of incentive pay for several types of managerial positions and include additional measures of earnings manipulation--end-of-year excess sales and class action litigation-in addition to the standard measure of discretionary accounting accruals. We find that the association between high-powered incentives and earnings manipulation varies by both type of incentive pay and position. Our findings have important policy implications and suggest that compensation committees should review pay policies of other managerial positions in addition to CEOs. Importantly, if the committees wanted to weaken incentive pay to get more truthful reporting, diluting the CFO's bonus and stock options would be one place to start.
The Real Effects Of Financial Reporting On Pay And Incentives
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Author : John E. Core
language : en
Publisher:
Release Date : 2020
The Real Effects Of Financial Reporting On Pay And Incentives written by John E. Core and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This paper discusses two real effects of financial reporting on pay and incentives: (1) Better earnings leads to better incentives, and (2) If pay is mis-measured, pay can be mis-used. The first real effect follows from the fact that incentives are often based on earnings, and the effectiveness of earnings-based incentives is positively related to the quality of earnings. Greater use of earnings in incentives provides better incentives at a lower cost. The second real effect has to do with how well the accounting system measures the expense of various pay components. Complex calculations are required to value complex pay components such as options, post-employment benefits, and performance-vested equity, and these calculations have historically not been done correctly. The incorrect accounting leads to these pay components being mis-used. I conclude by discussing how accounting and disclosure of pay and incentives can be improved.
Communications And Incentives
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Author : World Tourism Organization
language : en
Publisher:
Release Date : 2008
Communications And Incentives written by World Tourism Organization and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Business & Economics categories.
This publication addresses the high importance fast and sincere reporting plays for a global problem such as Avian and Human Influenza (AHI). The issue was identified during the first international simulation exercise in Paris in March 2007 as an area of concern for the travel and tourism industry which required further investigation. The publication includes an initial report evaluating the theoretical possibilities of penalties and incentives to improve fast and sincere reporting, the International Health Regulations of the World Health Organization are outlined and country studies report on the individual experiences made over the course of the current AHI threat.
Regulatory Oversight And Financial Reporting Incentives
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Author : Terrence Patrick Blackburne
language : en
Publisher:
Release Date : 2014
Regulatory Oversight And Financial Reporting Incentives written by Terrence Patrick Blackburne and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This study examines the determinants and consequences of regulatory oversight of corporate disclosures. I investigate the extent to which industry-level political activity influences the intensity of regulatory oversight, and whether variation in the intensity of oversight affects managers' reporting incentives. I exploit variation in the allocation of budgetary resources between the SEC's disclosure review offices as a source of variation in the oversight of financial reporting and disclosures. I find evidence of a significant relationship between industry-level political activity and visibility and the allocation of resources to each office. I then use the amount of budgetary resources allocated to each office as a proxy for the intensity of the SEC oversight that firms in a given industry face. I provide evidence that when SEC oversight is more intense managers report lower discretionary accruals, managers are less likely to issue financial reports that will be subsequently restated, and firms' bid-ask spreads decrease. Overall, the results suggest that SEC oversight plays an important role in shaping managers' reporting and disclosure incentives.
Sustaining Global Surveillance And Response To Emerging Zoonotic Diseases
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Author : National Research Council
language : en
Publisher: National Academies Press
Release Date : 2010-01-24
Sustaining Global Surveillance And Response To Emerging Zoonotic Diseases written by National Research Council and has been published by National Academies Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-01-24 with Medical categories.
H1N1 ("swine flu"), SARS, mad cow disease, and HIV/AIDS are a few examples of zoonotic diseases-diseases transmitted between humans and animals. Zoonotic diseases are a growing concern given multiple factors: their often novel and unpredictable nature, their ability to emerge anywhere and spread rapidly around the globe, and their major economic toll on several disparate industries. Infectious disease surveillance systems are used to detect this threat to human and animal health. By systematically collecting data on the occurrence of infectious diseases in humans and animals, investigators can track the spread of disease and provide an early warning to human and animal health officials, nationally and internationally, for follow-up and response. Unfortunately, and for many reasons, current disease surveillance has been ineffective or untimely in alerting officials to emerging zoonotic diseases. Sustaining Global Surveillance and Response to Emerging Zoonotic Diseases assesses some of the disease surveillance systems around the world, and recommends ways to improve early detection and response. The book presents solutions for improved coordination between human and animal health sectors, and among governments and international organizations. Parties seeking to improve the detection and response to zoonotic diseases-including U.S. government and international health policy makers, researchers, epidemiologists, human health clinicians, and veterinarians-can use this book to help curtail the threat zoonotic diseases pose to economies, societies, and health.
The Influence Of Materiality And Voluntary Incentives On Companies Decisions To Announce Accounting Restatements Through 8 K And Or Amended Filings
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Author : Marlene Plumlee
language : en
Publisher:
Release Date : 2014
The Influence Of Materiality And Voluntary Incentives On Companies Decisions To Announce Accounting Restatements Through 8 K And Or Amended Filings written by Marlene Plumlee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Many companies fail to announce restatements in 8-K reports and/or in amended financial statement filings (10-K/As). This lack of disclosure leads some to question whether companies are intentionally attempting to hide restatements from shareholders or whether, given the conservative nature of auditors and regulators, the lack of disclosure is due to the immaterial nature of some restatements. This study examines the relative importance of quantitative and qualitative materiality factors and voluntary incentive factors in explaining companies' decisions to file 8-K and/or amended reports for restatements. We find that the decision to file an 8-K report is primarily driven by materiality factors, although voluntary incentives provide incremental explanatory power even after controlling for the materiality of the restatement. In addition, in 2004 the SEC clarified that restatements are required to be announced via 8-K reports. Our findings suggest that this rule change appears to have decreased the importance of voluntary incentive factors in the 8-K filing decision. In contrast, we document that materiality factors explain much less and voluntary incentives explain much more of the amended filing decision than the 8-K decision. After the SEC's 8-K rule change, we find a decrease in the importance of both the materiality and voluntary incentive factors in the amended report decision and a decrease in amended filings. This might suggest that the SEC's clarification of the requirements for filing 8-K reports left companies unclear as to the requirements for filing amended reports.