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Article: Clawback adoptions, managerial compensation incentives, capital investment mix and efficiency
Title | Clawback adoptions, managerial compensation incentives, capital investment mix and efficiency |
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Authors | |
Issue Date | 1-Jan-2024 |
Publisher | Elsevier |
Citation | Journal of Corporate Finance, 2023, v. 84 How to Cite? |
Abstract | We present evidence that clawback adoptions, by dissuading accruals management, motivate managers to shift capital investment mix from R&D to capex to preserve earnings-based compensation, thereby lowering capital investment efficiency. These effects are more pronounced for firms prone to financial misreporting, which is consistent with board incentives to adopt clawbacks, and with managerial incentives to substitute real for accruals-based earnings management to preserve performance-based compensation. Path analyses lend support to performance-based compensation serving as a channel through which clawback adoptions influence capital investment mix and efficiency. These findings extend and reinterpret prior findings and are timely given the Security and Exchange Commission's newly issued Rule 10D-1 that makes clawback provision adoptions a condition for U.S. exchange listings and explicitly requested “comment on any effect the proposed requirements may have on efficiency, competition, and capital formation.” |
Persistent Identifier | http://hdl.handle.net/10722/339074 |
ISSN | 2022 Impact Factor: 6.1 2020 SCImago Journal Rankings: 1.894 |
DC Field | Value | Language |
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dc.contributor.author | Biddle, Gary | - |
dc.contributor.author | Chan, Lilian | - |
dc.contributor.author | Joo, Jeong Hwan | - |
dc.date.accessioned | 2024-03-11T10:33:41Z | - |
dc.date.available | 2024-03-11T10:33:41Z | - |
dc.date.issued | 2024-01-01 | - |
dc.identifier.citation | Journal of Corporate Finance, 2023, v. 84 | - |
dc.identifier.issn | 0929-1199 | - |
dc.identifier.uri | http://hdl.handle.net/10722/339074 | - |
dc.description.abstract | <p>We present evidence that clawback adoptions, by dissuading accruals management, motivate managers to shift capital investment mix from R&D to capex to preserve earnings-based compensation, thereby lowering capital investment efficiency. These effects are more pronounced for firms prone to financial misreporting, which is consistent with board incentives to adopt clawbacks, and with managerial incentives to substitute real for accruals-based earnings management to preserve performance-based compensation. Path analyses lend support to performance-based compensation serving as a channel through which clawback adoptions influence capital investment mix and efficiency. These findings extend and reinterpret prior findings and are timely given the Security and Exchange Commission's newly issued Rule 10D-1 that makes clawback provision adoptions a condition for U.S. exchange listings and explicitly requested “comment on any effect the proposed requirements may have on efficiency, competition, and capital formation.”<br></p> | - |
dc.language | eng | - |
dc.publisher | Elsevier | - |
dc.relation.ispartof | Journal of Corporate Finance | - |
dc.title | Clawback adoptions, managerial compensation incentives, capital investment mix and efficiency | - |
dc.type | Article | - |
dc.identifier.doi | 10.1016/j.jcorpfin.2023.102506 | - |
dc.identifier.volume | 84 | - |
dc.identifier.issnl | 0929-1199 | - |