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Article: The effects of firm-initiated clawback provisions on earnings quality and auditor behavior

TitleThe effects of firm-initiated clawback provisions on earnings quality and auditor behavior
Authors
KeywordsAccounting restatements
Audit fees
Audit risk
Clawbacks
The Dodd-Frank Act
Issue Date2012
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jae
Citation
Journal of Accounting and Economics, 2012, v. 54 n. 2-3, p. 180-196 How to Cite?
AbstractWhile firm-initiated compensation recovery (or clawback) provisions are gaining popularity and the recently enacted Dodd-Frank Act seeks to make the clawback of erroneously awarded compensation mandatory for all listed companies, little is known about their effectiveness. We find that the incidence of accounting restatements declines after firms initiate such provisions. In addition, we show that investors and auditors view such provisions as associated with increased accounting quality and lower audit risk. Specifically, we find that firms' earnings response coefficients increase after the adoption of clawback provisions. Further, for firms that adopt clawbacks, auditors are less likely to report material internal control weaknesses, charge lower audit fees, and issue audit reports with a shorter lag.
Persistent Identifierhttp://hdl.handle.net/10722/165795
ISSN
2015 Impact Factor: 3.535
2015 SCImago Journal Rankings: 6.834
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorChan, LHen_HK
dc.contributor.authorChen, KCWen_HK
dc.contributor.authorChen, TYen_HK
dc.contributor.authorYu, Yen_HK
dc.date.accessioned2012-09-20T08:23:58Z-
dc.date.available2012-09-20T08:23:58Z-
dc.date.issued2012en_HK
dc.identifier.citationJournal of Accounting and Economics, 2012, v. 54 n. 2-3, p. 180-196en_US
dc.identifier.issn0165-4101en_HK
dc.identifier.urihttp://hdl.handle.net/10722/165795-
dc.description.abstractWhile firm-initiated compensation recovery (or clawback) provisions are gaining popularity and the recently enacted Dodd-Frank Act seeks to make the clawback of erroneously awarded compensation mandatory for all listed companies, little is known about their effectiveness. We find that the incidence of accounting restatements declines after firms initiate such provisions. In addition, we show that investors and auditors view such provisions as associated with increased accounting quality and lower audit risk. Specifically, we find that firms' earnings response coefficients increase after the adoption of clawback provisions. Further, for firms that adopt clawbacks, auditors are less likely to report material internal control weaknesses, charge lower audit fees, and issue audit reports with a shorter lag.en_HK
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jaeen_HK
dc.relation.ispartofJournal of Accounting and Economicsen_HK
dc.subjectAccounting restatementsen_HK
dc.subjectAudit feesen_HK
dc.subjectAudit risken_HK
dc.subjectClawbacksen_HK
dc.subjectThe Dodd-Frank Acten_HK
dc.titleThe effects of firm-initiated clawback provisions on earnings quality and auditor behavioren_HK
dc.typeArticleen_HK
dc.identifier.emailChan, LH: lhlchan@hkucc.hku.hken_HK
dc.identifier.authorityChan, LH=rp01048en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jacceco.2012.05.001en_HK
dc.identifier.scopuseid_2-s2.0-84872494911en_HK
dc.identifier.hkuros206133en_US
dc.identifier.hkuros216388-
dc.identifier.isiWOS:000312683500007-
dc.publisher.placeNetherlandsen_HK
dc.identifier.scopusauthoridChan, LH=55251664500en_HK
dc.identifier.scopusauthoridChen, KCW=36851411200en_HK
dc.identifier.scopusauthoridChen, TY=8108503100en_HK
dc.identifier.scopusauthoridYu, Y=55252097100en_HK
dc.identifier.citeulike10696937-

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