Reputation penalties for poor monitoring of executive pay: Evidence from option backdating

Ertimur, Yonca; Ferri, Fabrizio; Maber, David A.

doi:10.1016/j.jfineco.2011.12.004

Cited by 161 publications

(125 citation statements)

References 47 publications

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“…In sum, our findings suggest that activist groups such as ActionAid can influence corporate outcomes, consistent with other research that shows that firms respond to pressure from external stakeholders (Smith [], Ertimur, Ferri, and Maber []) and that suggests real consequences to disclosure policies (e.g., Christensen et al. [2015], Granja [2014]).…”

Section: Resultssupporting

confidence: 91%

“…Our evidence suggests that public pressure can increase both corporate compliance with and government enforcement of existing laws. This evidence is consistent with other research indicating that firms respond to pressure from external stakeholders (Smith [1995]), internal employees (Wilde [2015]), and nonbinding shareholder votes (Ertimur, Ferri, and Maber [2012]), and extends research that examines whether political costs and reputational concerns influence corporate tax decisions (Hanlon and Slemrod [2009], Gallemore, Maydew, and Thornock [2014], Graham et al [2014], Austin and Wilson [2015])…”

Section: Introductionsupporting

confidence: 90%

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Public Pressure and Corporate Tax Behavior

Dyreng

Hoopes

Wilde

2016

J of Accounting Research

410

175

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We use a shock to the public scrutiny of firm subsidiary locations to investigate whether that scrutiny leads to changes in firms’ disclosure and corporate tax avoidance behavior. ActionAid International, a nonprofit activist group, levied public pressure on noncompliant U.K. firms in the FTSE 100 to comply with a rule requiring U.K. firms to disclose the location of all of their subsidiaries. We use this setting to examine whether the public pressure led scrutinized firms to increase their subsidiary disclosure, decrease tax avoidance, and reduce the use of subsidiaries in tax haven countries compared to other firms in the FTSE 100 not affected by the public pressure. The evidence suggests that the public scrutiny sufficiently changed the costs and benefits of tax avoidance such that tax expense increased for scrutinized firms. The results suggest that public pressure from outside activist groups can exert a significant influence on the behavior of large, publicly traded firms. Our findings extend prior research that has had little success documenting an empirical relation between public scrutiny of tax avoidance and firm behavior.

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Section: Resultssupporting

confidence: 91%

Section: Introductionsupporting

confidence: 90%

Public Pressure and Corporate Tax Behavior

Dyreng

Hoopes

Wilde

2016

J of Accounting Research

410

175

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“…Similarly, Ertimur, Ferri, and Maber () find no evidence that directors of firms involved in option backdating incur reputational penalties at other firms.…”

mentioning

confidence: 99%

The Labor Market for Directors and Externalities in Corporate Governance

Levit¹,

Malenko

2016

The Journal of Finance

135

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This paper studies how directors' reputational concerns affect board structure, corporate governance, and firm value. In our setting, directors affect their firms' governance, and governance in turn affects firms' demand for new directors. Whether the labor market rewards a shareholder‐friendly or management‐friendly reputation is determined in equilibrium and depends on aggregate governance. We show that directors' desire to be invited to other boards creates strategic complementarity of corporate governance across firms. Directors' reputational concerns amplify the governance system: strong systems become stronger and weak systems become weaker. We derive implications for multiple directorships, board size, transparency, and board independence.

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“…Similarly, Srinivasan () provides evidence that restatements for at least five quarters increase the likelihood of audit committee member removal by 10 per cent. Relatedly, when stock option backdating scandals occur, compensation and audit committee members are penalized by receiving fewer re‐election votes and are more likely to step down (Ertimur et al, ). For instance, compensation committee members during the backdating period received 10 per cent fewer re‐election votes compared to a two to three per cent penalty for other directors.…”

Section: Review Of the Board Committee Literaturementioning

confidence: 99%

Board Committees in Corporate Governance: A Cross‐Disciplinary Review and Agenda for the Future

Kolev

Wangrow

Barker

et al. 2019

J Management Studies

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The importance of board committees – specialized subgroups that exist to perform many of the board's most critical functions, such as setting executive compensation, identifying potential board members, and overseeing financial reporting – has grown over time due to increased legal requirements and greater complexity of the environment in which firms operate. This has resulted in a large body of work examining board committees across the accounting, finance, and management disciplines. However, this research has developed rather independently within each discipline, preventing scholars and practitioners from developing a comprehensive understanding of board committees. To address this issue, we conduct a comprehensive review of the literature that: 1) summarizes and synthesizes antecedents and outcomes associated with board committees in publicly‐traded firms in English common law countries; and 2) offers a critical analysis of existing research, providing recommendations for advancements and new directions in board committee research.

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Reputation penalties for poor monitoring of executive pay: Evidence from option backdating

Cited by 161 publications

References 47 publications

Public Pressure and Corporate Tax Behavior

Public Pressure and Corporate Tax Behavior

The Labor Market for Directors and Externalities in Corporate Governance

Board Committees in Corporate Governance: A Cross‐Disciplinary Review and Agenda for the Future

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