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- Publisher Website: 10.1080/09638180.2020.1741419
- Scopus: eid_2-s2.0-85083588888
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Article: The Effects of Table Versus Formula Presentation Formats on Investors’ Judgment about Executive Compensation
Title | The Effects of Table Versus Formula Presentation Formats on Investors’ Judgment about Executive Compensation |
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Authors | |
Keywords | Data presentation format Understandability effect Halo effect Say-on-pay |
Issue Date | 2021 |
Publisher | Routledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/09638180.asp |
Citation | The European Accounting Review, 2021, v. 30 n. 1, p. 143-173 How to Cite? |
Abstract | We investigate how the data presentation format of executive compensation disclosures affects investors’ compensation- and investment-related judgment and decisions. We examine the effects of these formats and their underlying mechanisms via laboratory experiments. We compare bonus schemes presented in the table and formula formats and find an interaction effect between data presentation format and compensation favorability. When a manager receives unfavorable compensation due to missed performance targets, the table format is easier to understand than the formula format, whereas the latter appears more scientific than the former. These two effects work in opposite directions and therefore, result in an insignificant difference in approval ratings when the table, versus the formula, format is used. However, when the manager receives favorable compensation for beating performance targets, investors do not pay much attention to the disclosure’s understandability but still favor the formula format, as it has a scientific appearance. Therefore, we find that investors’ approval ratings are higher when using the formula format than the table format. We contribute to several research areas such as information understandability, the halo effect, compensation disclosures, and shareholder voting. Our findings also have practical implications for both managers and investors. |
Persistent Identifier | http://hdl.handle.net/10722/282479 |
ISSN | 2023 Impact Factor: 2.5 2023 SCImago Journal Rankings: 1.264 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Xia, Y | - |
dc.contributor.author | Han, J | - |
dc.date.accessioned | 2020-05-15T05:28:39Z | - |
dc.date.available | 2020-05-15T05:28:39Z | - |
dc.date.issued | 2021 | - |
dc.identifier.citation | The European Accounting Review, 2021, v. 30 n. 1, p. 143-173 | - |
dc.identifier.issn | 0963-8180 | - |
dc.identifier.uri | http://hdl.handle.net/10722/282479 | - |
dc.description.abstract | We investigate how the data presentation format of executive compensation disclosures affects investors’ compensation- and investment-related judgment and decisions. We examine the effects of these formats and their underlying mechanisms via laboratory experiments. We compare bonus schemes presented in the table and formula formats and find an interaction effect between data presentation format and compensation favorability. When a manager receives unfavorable compensation due to missed performance targets, the table format is easier to understand than the formula format, whereas the latter appears more scientific than the former. These two effects work in opposite directions and therefore, result in an insignificant difference in approval ratings when the table, versus the formula, format is used. However, when the manager receives favorable compensation for beating performance targets, investors do not pay much attention to the disclosure’s understandability but still favor the formula format, as it has a scientific appearance. Therefore, we find that investors’ approval ratings are higher when using the formula format than the table format. We contribute to several research areas such as information understandability, the halo effect, compensation disclosures, and shareholder voting. Our findings also have practical implications for both managers and investors. | - |
dc.language | eng | - |
dc.publisher | Routledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/09638180.asp | - |
dc.relation.ispartof | The European Accounting Review | - |
dc.rights | Preprint: This is an Author's Original Manuscript of an article published by Taylor & Francis Group in [JOURNAL TITLE] on [date of publication], available online: http://www.tandfonline.com/doi/abs/[Article DOI]. Postprint: This is an Accepted Manuscript of an article published by Taylor & Francis Group in [JOURNAL TITLE] on [date of publication], available online at: http://www.tandfonline.com/doi/abs/[Article DOI]. | - |
dc.subject | Data presentation format | - |
dc.subject | Understandability effect | - |
dc.subject | Halo effect | - |
dc.subject | Say-on-pay | - |
dc.title | The Effects of Table Versus Formula Presentation Formats on Investors’ Judgment about Executive Compensation | - |
dc.type | Article | - |
dc.identifier.email | Han, J: junhan@business.hku.hk | - |
dc.identifier.authority | Han, J=rp01066 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1080/09638180.2020.1741419 | - |
dc.identifier.scopus | eid_2-s2.0-85083588888 | - |
dc.identifier.hkuros | 309870 | - |
dc.identifier.volume | 30 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 143 | - |
dc.identifier.epage | 173 | - |
dc.identifier.isi | WOS:000557477100001 | - |
dc.publisher.place | United Kingdom | - |
dc.identifier.issnl | 0963-8180 | - |