Managerial Incentives and Corporate Fraud: The Sources of Incentives Matter*

Johnson, Shane A.; Ryan, Harley E.; Tian, Yisong S.

doi:10.1093/rof/rfn014

Cited by 380 publications

(210 citation statements)

References 36 publications

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“…A study by Baker, Collins, and Reitenga (2003) suggests that managers are more likely to engage in earnings management when their total compensation depends heavily on financial performance, as through stock options. Johnson, Ryan, and Tian (2008) report that these effects are most pronounced when compensation consists of vested options or unrestricted stock, when managers would feel the effect of a drop in stock price most acutely.…”

Section: Management's Rolementioning

confidence: 99%

Corporate Governance and Accountability

Jones

2010

Corporate Governance

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Section: Management's Rolementioning

confidence: 99%

Corporate Governance and Accountability

Jones

2010

Corporate Governance

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“…Our study is an extension of prior literature documenting that managers inflate earnings in order to maximize the value of their equity compensation via higher stock valuations (Bergstresser and Philippon, 2006;Burns and Kedia, 2006;Cheng and Warfield, 2005;Efendi et al, 2007;Goldman and Slezak, 2006;Harris and Bromiley, 2007;Johnson et al, 2009).…”

Section: Introductionmentioning

confidence: 92%

Stock Options, Idiosyncratic Volatility, and Earnings Quality

Alam

Liu²,

Liu

et al. 2015

Rev. Pac. Basin Finan. Mark. Pol.

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Rev. Pac. Basin Finan. Mark. Pol. 2015.18. Downloaded from www.worldscientific.com by FLINDERS UNIVERSITY LIBRARY on 10/12/15. For personal use only.earnings quality and idiosyncratic volatility: Hence, the lower the earnings quality, the greater the idiosyncratic volatility, and the higher the value of stock options. This study investigates whether there is a link between CEO equity compensation and earnings quality. Using a simultaneous system of equations, we find negative correlations between the two, suggesting that managers have incentives to reduce earnings quality.

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“…Although the presence of an incentive can increase cheating, larger and more valued incentives can lead to even more unethical conduct, as demonstrated by Harris and Bromiley (2007), who reported that the “percentage of CEO compensation delivered via stock option grants significantly influences financial misrepresentation” (p. 350). Others have also found a link between larger incentives leading to greater unethical conduct (Murdock & Anderman, 2006; Johnson, Ryan, & Tian, 2009). …”

Section: Incentivesmentioning

confidence: 99%

Threats to Moral Identity: Testing the Effects of Incentives and Consequences of One's Actions on Moral Cleansing

Harkrider¹,

Tamborski

Wang³

et al. 2013

Ethics & Behavior

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Individuals engage in moral cleansing, a compensatory process to reaffirm one’s moral identity, when one’s moral self-concept is threatened. However, too much moral cleansing can license individuals to engage in future unethical acts. This study examined the effects of incentives and consequences of one’s actions on cheating behavior and moral cleansing. Results found that incentives and consequences interacted such that unethical thoughts were especially threatening, resulting in more moral cleansing, when large incentives to cheat were present and cheating explicitly harmed others. Implications are discussed in terms of ethics training, using incentives as motivators, and the depersonalized norms of science.

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Managerial Incentives and Corporate Fraud: The Sources of Incentives Matter*

Cited by 380 publications

References 36 publications

Corporate Governance and Accountability

Corporate Governance and Accountability

Stock Options, Idiosyncratic Volatility, and Earnings Quality

Threats to Moral Identity: Testing the Effects of Incentives and Consequences of One's Actions on Moral Cleansing

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