Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation

Harris, Jared D.; Bromiley, Philip

doi:10.1287/orsc.1060.0241

Cited by 601 publications

(560 citation statements)

References 94 publications

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“…We believe that our contributions also lend further support to the nascent but growing body of research indicating that equity-based compensation may not motivate CEOs to act in the best interests of shareholders (e.g., Harris & Bromiley, 2007;Sanders & Hambrick, 2007).…”

Section: Discussionsupporting

confidence: 55%

Do They Walk the Talk? Gauging Acquiring CEO and Director Confidence in the Value Creation Potential of Announced Acquisitions

Devers

McNamara

Haleblian³

et al. 2013

AMJ

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We explore whether acquiring CEOs and directors act consistently with the idea that their newly announced acquisitions will increase long-term firm value. Specifically, we examine postannouncement adjustments to CEOs' equity-based holdings and find acquiring CEOs tend to exercise options and sell firm stock following acquisition announcements. Moreover, positive short-term market performance exacerbates this effect. Further, we find directors tend to grant their acquiring CEOs stock options, after acquisition announcement, presumably to more tightly align CEO-shareholder interests. These findings suggest that when CEOs and directors manage acquiring CEOs' equity-based holdings, they do not appear to anticipate long-term value creation from their acquisitions.

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Section: Discussionsupporting

confidence: 55%

Do They Walk the Talk? Gauging Acquiring CEO and Director Confidence in the Value Creation Potential of Announced Acquisitions

Devers

McNamara

Haleblian³

et al. 2013

AMJ

View full text Add to dashboard Cite

show abstract

“…Like earlier studies, most recent work in this area treats compensation contracts as exogenous and looks for a positive relationship between executives' equity incentives and earnings management (Larcker, Richardson, and Tuna, 2007;Cheng and Warfield, 2005), the frequency of accounting restatements (Harris and Bromiley, 2007;Burns and Kedia, 2006;Efendi, Srivastava, and Swanson, 2007;Armstrong, Jagolinzer, and Larcker, 2010a), or SEC Accounting and Auditing Enforcement Releases (Erickson, Hanlon, and Maydew, 2006;Johnson, Ryan, and, Tian, 2009). Most studies adopt a "rent extraction" perspective and interpret a positive relationship between equity incentives and accounting manipulation as a symptom of "bad" governance and misaligned managerial incentives.…”

mentioning

confidence: 99%

The Role of Information and Financial Reporting in Corporate Governance and Debt Contracting

Armstrong¹,

2010

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Abstract:We review recent literature on the role of financial reporting transparency in reducing governance-related agency conflicts among managers, directors, and shareholders, as well as in reducing agency conflicts between shareholders and creditors, and offer researchers some suggested avenues for future research. Key themes include the endogenous nature of debt contracts and governance mechanisms with respect to information asymmetry between contracting parties, the heterogeneous nature of the informational demands of contracting parties, and the heterogeneous nature of the resulting governance and debt contracts. We also emphasize the role of a commitment to financial reporting transparency in facilitating informal multi-period contracts among managers, directors, shareholders, and creditors.Keywords: financial accounting; corporate governance; board structure; contracting; executive compensation; debt contracts; informal contracts We thank the following for helpful comments and suggestions:

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“…Some statistical methods could, at least partly, help to overcome the limitations regarding data. Techniques such as combined pairings (see Collins & Hansen, 2012;Harris & Bromiley, 2007) could be used, comparing companies with different performances, providing an alternative for building a small database and important insights for research. Matched-pairs approach have already been used by Collins and Hansen (2012), Hambrick and D'Aveni (1988) and Harris and Bromiley (2007).…”

Section: Challenges To Overcome When Conducting Research On Decline Amentioning

confidence: 99%

Organizational Decline Research Review: Challenges and Issues for a Future Research Agenda

Serra

Pinto

Guerrazzi

et al. 2017

BAR, Braz. Adm. Rev.

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Organizational decline is related to the deterioration of the resource base and performance of an organization for a sustained period of time. Although some studies have been conducted, it remains an understudied phenomenon, despite its importance. The study of organizational decline is faced with challenges to improving and increasing research. In this study, we analyze the scientific field of organizational decline in business and management journals with a high impact factor. We conducted a mixed-method study: a bibliometric study of a sample of 214 articles, and a qualitative study with 41 authors. We used an analysis of citations, co-citations and factor analysis. This enabled the identification of the most influential works and their conceptual approaches. The interviews with the authors were analyzed using content analysis, which complemented our understanding of the challenges and problems facing the theme. The results show that organizational decline can be organized into three different aspects: organizational decline itself; studies on turnaround; and mortality. Specific challenges to overcome are related to a better definition, cognitive issues and other issues on decision-making and specific methodological problems. In addition, it is necessary to evaluate whether theories that explain growth are also able to explain decline.

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Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation

Cited by 601 publications

References 94 publications

Do They Walk the Talk? Gauging Acquiring CEO and Director Confidence in the Value Creation Potential of Announced Acquisitions

Do They Walk the Talk? Gauging Acquiring CEO and Director Confidence in the Value Creation Potential of Announced Acquisitions

The Role of Information and Financial Reporting in Corporate Governance and Debt Contracting

Organizational Decline Research Review: Challenges and Issues for a Future Research Agenda

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