The Impact Of Cfos Incentives And Earnings Management Ethics On Their Financial Reporting Decisions

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Cfos' Incentives and Earnings Management Ethics Impact on Their Financial Decisions

Author : Dennis Nangabo
Publisher : Grin Publishing
ISBN 13 : 9783668307889
Total Pages : 20 pages
Book Rating : 4.3/5 (78 download)

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Book Synopsis Cfos' Incentives and Earnings Management Ethics Impact on Their Financial Decisions by : Dennis Nangabo

Download or read book Cfos' Incentives and Earnings Management Ethics Impact on Their Financial Decisions written by Dennis Nangabo and published by Grin Publishing. This book was released on 2016-09-28 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essay from the year 2015 in the subject Art - Arts Management, language: English, abstract: Despite the regulatory reforms targeted at limiting aggressive earnings management and financial reporting continues to be a major concern of the regulators, standards setters and the industry practitioners. To bring the practice to light and offer mitigative solutions, the paper carries out an experiment to investigate the impact of two independent variables on the discretionary CFO's expense control. Incentive conflict, one of the independent variable is manipulated at two different levels (past and present). EM-Ethics (earnings management ethics) is the other CFOs independent variable (low vs. high). And it is measured as the CFOs assessment of the ethicalness of the primary earnings management motivations. We discover that the EM-Ethics and incentive conflict interact to determine the discretionary accruals for the CFOs such that (a) when the incentive conflict is absent, the CFOs with high (low) EM-Ethics do tend to resist (give in) the corporate incentive through booking higher (lower) expense accrual. (b) when the incentive conflict is absent, the CFOs with (high) low EM-Ethics do tend to resist (give into) the incentive through booking (lower) higher expense accruals. The practical and theoretical implications of the research findings are discussed.

The Impact of CFOs' Incentives and Earnings Management Ethics on Their Financial Reporting Decisions

Author : Cathy Beaudoin
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Book Synopsis The Impact of CFOs' Incentives and Earnings Management Ethics on Their Financial Reporting Decisions by : Cathy Beaudoin

Download or read book The Impact of CFOs' Incentives and Earnings Management Ethics on Their Financial Reporting Decisions written by Cathy Beaudoin and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

How Powerful CFOs Camouflage and Exploit Equity-Based Incentive Compensation

Author : Denton Collins
Publisher :
ISBN 13 :
Total Pages : 47 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis How Powerful CFOs Camouflage and Exploit Equity-Based Incentive Compensation by : Denton Collins

Download or read book How Powerful CFOs Camouflage and Exploit Equity-Based Incentive Compensation written by Denton Collins and published by . This book was released on 2017 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: While numerous studies have examined the impact that powerful CEOs have on their compensation and overall firm decisions, relatively little is known about how powerful CFOs influence their compensation and important firm financial reporting and operational outcomes. This is somewhat surprising given the critical role CFOs play in the financial reporting process of a firm. Using managerial power theory (Bebchuk and Fried, 2003) and the theory of power and self-focus (Pitesa and Thau, 2013), we predict that powerful CFOs employ a two-part strategy to camouflage excessive incentive compensation above what efficient contracting would dictate. First, powerful CFOs use their power and influence to negotiate shorter incentive pay duration on a non-arm's length basis to maximize the present value of cash flows. Second, when their incentive equity compensation vests, we suggest that CFOs manage earnings to further enhance their personal income. Consistent with our theoretical expectations, we find higher levels of income-increasing accrual-based earnings management and real transactions management, a potentially unethical practice, in firms with powerful CFOs who have short pay durations. We discuss the implications of our analysis in the context of mitigating CFO power and managing the ethical environment “tone at the top.”

Earnings Management

Author : Joshua Ronen
Publisher : Springer Science & Business Media
ISBN 13 : 0387257713
Total Pages : 587 pages
Book Rating : 4.3/5 (872 download)

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Book Synopsis Earnings Management by : Joshua Ronen

Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?

Tournament Incentives Vs. Equity Incentives of CFOs

Author : Feng Han
Publisher :
ISBN 13 :
Total Pages : 83 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Tournament Incentives Vs. Equity Incentives of CFOs by : Feng Han

Download or read book Tournament Incentives Vs. Equity Incentives of CFOs written by Feng Han and published by . This book was released on 2017 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation consists of two essays on CFOs' promotion-based tournament incentives and performance-based equity incentives. The first essay examines the joint implications of CFOs' tournament incentives and equity incentives for firms' risk-taking. With the pay gap between the CEO and the CFO as the proxy for the CFO's tournament incentives, I find that the relationship between a firm's risk taking and the CFO's tournament incentives is non-monotonic. In particular, I show that below a certain level, increase in pay gap is associated with increase in firm risk taking (e.g., higher leverage, lower cash holding balance and higher R&D intensity). However, after reaching a certain level, the CEO-CFO pay gap negatively impacts risk-taking, as increase in pay gap is associated with lower leverage, higher cash holding balance and lower R&D intensity. With the CFO's pay-performance sensitivity as the proxy for the CFO's equity incentives, I find that the CFO's equity incentives negatively impact firm's R&D intensity, but have no significant impact on broader financial decisions such as capital structure and cash policy. Collectively, my findings indicate that CFO incentives play an important role in firm's risk-taking behaviors, and the effect of the CFO's tournament incentives is more pronounced. The second essay studies the impact of tournament incentives and equity incentives for CFOs on firms' earnings management, including accrual-based earnings management (e.g., total accruals, abnormal accruals) and real activities manipulation (e.g., abnormal discretionary expenditures, abnormal production costs). Measuring the CFO's tournament incentives as the pay gap between the CEO and the CFO, I show that the CFO's tournament incentives positively influence total accruals and abnormal accruals. Meanwhile, the CFO's equity incentives, measured as the CFO's pay-performance sensitivity, are found positively related to real activities manipulation proxies and total accruals. My findings show a consistent pattern before and after the passage of SOX (Sarbanes-Oxley Act of 2002), but the incentives' effects on earnings management have become less significant in the post-SOX period. Overall, the CFOs' tournament and equity incentives both play an important role in earnings management, but their relative importance lies in different earnings management techniques.

Executive Compensation and Financial Accounting

Author : David Aboody
Publisher : Now Publishers Inc
ISBN 13 : 1601983425
Total Pages : 98 pages
Book Rating : 4.6/5 (19 download)

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Book Synopsis Executive Compensation and Financial Accounting by : David Aboody

Download or read book Executive Compensation and Financial Accounting written by David Aboody and published by Now Publishers Inc. This book was released on 2010 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt: Executive Compensation and Financial Accounting provides research perspectives on the interface between financial reporting and disclosure policies and executive compensation. In particular, it focuses on two important dimensions: - the effects of compensation-based incentives on executives' financial accounting and disclosure choices, and - the role of financial reporting and income tax regulations in shaping executive compensation practices. Executive Compensation and Financial Accounting examines the key dimensions of the relation between financial accounting and executive compensation. Specifically, the authors examine the extent to which compensation plans create incentives for executives to make particular financial reporting and disclosure choices. They also examine the extent to which accounting regulation creates incentives for firms to design particular compensation plans for their executives.

Ethics, Equity, and Regulation

Author : Cheryl R. Lehman
Publisher : Emerald Group Publishing
ISBN 13 : 1849507287
Total Pages : 254 pages
Book Rating : 4.8/5 (495 download)

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Book Synopsis Ethics, Equity, and Regulation by : Cheryl R. Lehman

Download or read book Ethics, Equity, and Regulation written by Cheryl R. Lehman and published by Emerald Group Publishing. This book was released on 2010-05-18 with total page 254 pages. Available in PDF, EPUB and Kindle. Book excerpt: How can we account for continuing inequalities in an era promoting enlightened social and economic connections? What mechanisms of perceptions and politics will enable policy makers and scholars to advance significant progressive change? This title examines accounting's contribution to these challenges given the profession's multifaceted roles.

Research on Professional Responsibility and Ethics in Accounting

Author : C. Richard Baker
Publisher : Emerald Group Publishing
ISBN 13 : 1838676716
Total Pages : 155 pages
Book Rating : 4.8/5 (386 download)

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Book Synopsis Research on Professional Responsibility and Ethics in Accounting by : C. Richard Baker

Download or read book Research on Professional Responsibility and Ethics in Accounting written by C. Richard Baker and published by Emerald Group Publishing. This book was released on 2020-10-16 with total page 155 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a continuing of a long series focusing on professional responsibility and ethics in accounting.

An Empirical Analysis of the Effects of Monitoring Intensity on the Relation Between Equity Incentives and Earnings Management

Author : Scott Duellman
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (131 download)

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Book Synopsis An Empirical Analysis of the Effects of Monitoring Intensity on the Relation Between Equity Incentives and Earnings Management by : Scott Duellman

Download or read book An Empirical Analysis of the Effects of Monitoring Intensity on the Relation Between Equity Incentives and Earnings Management written by Scott Duellman and published by . This book was released on 2013 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior studies suggest that equity incentives inherently have both an interest alignment effect and an opportunistic financial reporting effect. Using three distinct proxies for earnings management we find evidence consistent with the incentive alignment (opportunistic financial reporting) effect of equity incentives increasing as monitoring intensity increases (decreases). Furthermore, using the accrual-based earnings management and meet/beat analyst forecast models we find that the opportunistic financial reporting effect of equity incentives dominates the incentive alignments effect for firms with low monitoring intensity. Using proxies for real earnings management, we find that the incentive alignment effect dominates the opportunistic financial reporting effect for high and moderate monitoring intensity firms. However, for low monitoring intensity firms the opportunistic reporting effect mitigates, but does not completely offset, the benefits of the incentive alignment effect. Overall, these findings are consistent with the level of monitoring affecting the relation between equity incentives and earnings management.

The Endogeneity of Executive Compensation and Its Impact on Management Discretionary Behavior Over Financial Reporting

Author : Lan Sun
Publisher :
ISBN 13 :
Total Pages : 35 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis The Endogeneity of Executive Compensation and Its Impact on Management Discretionary Behavior Over Financial Reporting by : Lan Sun

Download or read book The Endogeneity of Executive Compensation and Its Impact on Management Discretionary Behavior Over Financial Reporting written by Lan Sun and published by . This book was released on 2017 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Extant literature has emerged testing the relationship between executive compensation and earnings management and many these studies have documented that compensation contracts create strong incentives for management discretionary behavior over financial reporting. Previous studies also pointed out that executive compensation could be simultaneously co-determined with earnings management, suggesting a potential endogeneity problem may exist between discretionary accruals and compensation structure. Using a sample of all Australian Securities Exchange (ASX) listed companies comprising 3,326 firm-year observations encompassing the periods from 2000 to 2006, this study examines the endogeneity of executive total compensation and its various components. Applying a 2SLS model the results show a significantly negative association between expected fixed compensation (particularly expected salary) and upwards earnings management and a significantly positive association between expected at-risk compensation (particularly expected bonuses) and upwards earnings management. These findings suggest endogeneity exists in that fixed compensation and salaries provide disincentives for managers to practice aggressive earnings management whereas at-risk compensation and bonuses induce managers to employ income-increasing discretionary accruals to inflate reported earnings. This study found that executive compensation plays a role in determining earnings management activities. Executives may distort financial reporting to maximize their personal wealth if their incentives are not fully aligned with those of shareholders. Compensation committees, therefore, may gain some insight in designing compensation structures that balance the incentive to improve a firm's performance with the incentive to earnings manipulation.

Essentials of Business Ethics

Author : Peter Madsen
Publisher : Plume
ISBN 13 :
Total Pages : 420 pages
Book Rating : 4.4/5 (91 download)

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Book Synopsis Essentials of Business Ethics by : Peter Madsen

Download or read book Essentials of Business Ethics written by Peter Madsen and published by Plume. This book was released on 1990 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt: Insider trading... hostile takeovers... union busting... drug testing... environmental disasters Can anything good be said about modern business? Drawing on sources ranging from Newsweek to the Harvard Business Review and featuring such eminent social and business writers as Ralph Nader, Milton Friedman, and Peter Drucker, Essentials of Business Ethics critically appraises the evolution--and lapses--of ethics in the corporate boardroom. This important volume takes a hard look at the idea of business ethics itself, the ways in which employees are treated, how corporations deal with questions of social responsibility and the environment, the ethics of multinationals, and more. It is required reading for anyone who wants to understand the major issues facing modern businesses--and the impact they are having on our world.

CFO Role and CFO Compensation

Author : Ariela Caglio
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis CFO Role and CFO Compensation by : Ariela Caglio

Download or read book CFO Role and CFO Compensation written by Ariela Caglio and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Given concerns over CFO pay, especially incentives, and considering the tension between a CFO's fiduciary responsibility and being a key member of the firm's executive team, we examine the determinants and effects of CFO compensation amount, incentive intensity, and proximity to CEO compensation in a sample of European companies (FTE 500, 2005-2009). First, we focus on the CFO role as a determinant of CFO compensation. Like prior work, we proxy for CFO roles by using hand-collected public data on education and past professional experience, but we supplement these proxies with proprietary data to more directly capture the firm-specific nature of the CFO job in term of its similarity with that of the CEO. We thus argue how CFOs can have varied roles characterized by different levels of financial expertise and CEO-likeness, and document that it is this latter aspect that is associated with CFO compensation. Second, we study the effects of CFO compensation design on outcomes in the CFO's realm related to financial reporting. We find that CFO financial expertise is positively associated with financial reporting quality, while a CFO's pay long-term incentive intensity and a CFO's incentive compensation proximity with the CEO are negatively associated with financial reporting quality. Overall, then, our results suggest that CFOs get rewarded for their CEO-likeness, and particularly for their being similar to the CEO in terms of tasks and decision making authority. But it is their financial expertise that is positively related to financial reporting quality. At the same time, using compensation that is more incentive intensive and more similar to that of the CEO appears to be potentially detrimental to the quality of financial reporting. These results are relevant for boards involved in selecting highly expert CFOs, and their compensation committees charged with defining subsequently effective incentive compensation plans for those CFOs.

The End of Accounting and the Path Forward for Investors and Managers

Author : Baruch Lev
Publisher : John Wiley & Sons
ISBN 13 : 1119191084
Total Pages : 268 pages
Book Rating : 4.1/5 (191 download)

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Book Synopsis The End of Accounting and the Path Forward for Investors and Managers by : Baruch Lev

Download or read book The End of Accounting and the Path Forward for Investors and Managers written by Baruch Lev and published by John Wiley & Sons. This book was released on 2016-06-14 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt: An innovative new valuation framework with truly useful economic indicators The End of Accounting and the Path Forward for Investors and Managers shows how the ubiquitous financial reports have become useless in capital market decisions and lays out an actionable alternative. Based on a comprehensive, large-sample empirical analysis, this book reports financial documents' continuous deterioration in relevance to investors' decisions. An enlightening discussion details the reasons why accounting is losing relevance in today's market, backed by numerous examples with real-world impact. Beyond simply identifying the problem, this report offers a solution—the Value Creation Report—and demonstrates its utility in key industries. New indicators focus on strategy and execution to identify and evaluate a company's true value-creating resources for a more up-to-date approach to critical investment decision-making. While entire industries have come to rely on financial reports for vital information, these documents are flawed and insufficient when it comes to the way investors and lenders work in the current economic climate. This book demonstrates an alternative, giving you a new framework for more informed decision making. Discover a new, comprehensive system of economic indicators Focus on strategic, value-creating resources in company valuation Learn how traditional financial documents are quickly losing their utility Find a path forward with actionable, up-to-date information Major corporate decisions, such as restructuring and M&A, are predicated on financial indicators of profitability and asset/liabilities values. These documents move mountains, so what happens if they're based on faulty indicators that fail to show the true value of the company? The End of Accounting and the Path Forward for Investors and Managers shows you the reality and offers a new blueprint for more accurate valuation.

The Effect of Local Tournament Incentives on Firms' Performance, Risk-Taking Decisions, and Financial Reporting Decisions

Author : Matthew Ma
Publisher :
ISBN 13 :
Total Pages : 71 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis The Effect of Local Tournament Incentives on Firms' Performance, Risk-Taking Decisions, and Financial Reporting Decisions by : Matthew Ma

Download or read book The Effect of Local Tournament Incentives on Firms' Performance, Risk-Taking Decisions, and Financial Reporting Decisions written by Matthew Ma and published by . This book was released on 2019 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study documents the existence of local employment preferences for corporate executives and examines how the compensation of executives' local peers affects their own performance, risk-taking decisions, and financial reporting decisions. We find that external hires of new CEOs (CFOs) are five (eight) times more likely to be from local firms than non-local firms. We also find that local tournament incentives--as proxied by the pay gap between an executive and higher-paid executives in the area--are associated with stronger performance, greater risk taking, and more financial misreporting. We find consistent results using a difference-in-difference analysis that exploits plausibly exogenous variation in local tournament incentives caused by the sudden death of a local CEO. Our findings are consistent with executives taking actions to compete for a promotion to a nearby firm with higher pay. In addition, we find the effect of local tournament incentives is larger when local mobility is greater and executives' local preferences are stronger.

Research in Accounting in Emerging Economies

Author : Shahzad Uddin
Publisher : Emerald Group Publishing
ISBN 13 : 0857244523
Total Pages : 310 pages
Book Rating : 4.8/5 (572 download)

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Book Synopsis Research in Accounting in Emerging Economies by : Shahzad Uddin

Download or read book Research in Accounting in Emerging Economies written by Shahzad Uddin and published by Emerald Group Publishing. This book was released on 2010-12-02 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: Includes research papers that examines various issues including the adoption of International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSASs), management accounting change in the context of public sector reforms, corporate reporting disclosures, auditing, etcetera.

The H Factor of Personality

Author : Kibeom Lee
Publisher : Wilfrid Laurier Univ. Press
ISBN 13 : 1554588650
Total Pages : 212 pages
Book Rating : 4.5/5 (545 download)

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Book Synopsis The H Factor of Personality by : Kibeom Lee

Download or read book The H Factor of Personality written by Kibeom Lee and published by Wilfrid Laurier Univ. Press. This book was released on 2013-05-21 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt: The “H” in the H factor stands for “Honesty-Humility,” one of the six basic dimensions of the human personality. People who have high levels of H are sincere and modest; people who have low levels are deceitful and pretentious. It isn’t intuitively obvious that traits of honesty and humility go hand in hand, and until very recently the H factor hadn’t been recognized as a basic dimension of personality. But scientific evidence shows that traits of honesty and humility form a unified group of personality traits, separate from those of the other five groups identified several decades ago. This book, written by the discoverers of the H factor, explores the scientific findings that show the importance of this personality dimension in various aspects of people’s lives: their approaches to money, power, and sex; their inclination to commit crimes or obey the law; their attitudes about society, politics, and religion; and their choice of friends and spouse. Finally, the book provides ways of identifying people who are low in the H factor, as well as advice on how to raise one’s own level of H.

Earnings Quality

Author : Jennifer Francis
Publisher : Now Publishers Inc
ISBN 13 : 1601981147
Total Pages : 97 pages
Book Rating : 4.6/5 (19 download)

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Book Synopsis Earnings Quality by : Jennifer Francis

Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.