{"title":"Enhanced Compensation Disclosure and Ex Post Discretionary Adjustments of Realized Performance in Executive Incentive Contracts","authors":"Sunyoung Kim, J. Shin","doi":"10.2308/jmar-2020-082","DOIUrl":null,"url":null,"abstract":"\n Recent research shows that the United States Securities and Exchange Commission’s enhanced compensation disclosures introduced in 2006 reduced boards’ flexibility in their compensation decisions and that boards immediately reacted by increasing executive pay to compensate for additional pay risk. We investigate firms’ longer-term reactions to these new disclosure rules. We find that firms often adjust realized earnings per share ex post when deciding their executives’ bonuses, and this practice has gained popularity since 2006. The use of ex post discretionary adjustments is more pronounced when boards’ demand for compensation flexibility is higher. Overall, our findings suggest that ex post discretionary adjustments are a source of flexibility that boards use to cope with limited compensation flexibility under the new compensation discussion and analysis disclosure rules.\n Data Availability: Data are available from the public sources cited in the text.\n JEL Classifications: M41; M52.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.4000,"publicationDate":"2023-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Management Accounting Research","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2308/jmar-2020-082","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Recent research shows that the United States Securities and Exchange Commission’s enhanced compensation disclosures introduced in 2006 reduced boards’ flexibility in their compensation decisions and that boards immediately reacted by increasing executive pay to compensate for additional pay risk. We investigate firms’ longer-term reactions to these new disclosure rules. We find that firms often adjust realized earnings per share ex post when deciding their executives’ bonuses, and this practice has gained popularity since 2006. The use of ex post discretionary adjustments is more pronounced when boards’ demand for compensation flexibility is higher. Overall, our findings suggest that ex post discretionary adjustments are a source of flexibility that boards use to cope with limited compensation flexibility under the new compensation discussion and analysis disclosure rules.
Data Availability: Data are available from the public sources cited in the text.
JEL Classifications: M41; M52.
最近的研究表明，美国证券交易委员会（United States Securities and Exchange Commission）在2006年引入的强化薪酬披露降低了董事会在薪酬决策方面的灵活性，董事会立即做出反应，提高高管薪酬，以补偿额外的薪酬风险。我们调查了公司对这些新披露规则的长期反应。我们发现，公司在决定高管奖金时，经常会调整税后实现的每股收益，这种做法自2006年以来一直很流行。当董事会对薪酬灵活性的要求更高时，事后自由裁量调整的使用更为明显。总的来说，我们的研究结果表明，根据新的薪酬讨论和分析披露规则，董事会利用事后自由裁量调整来应对有限的薪酬灵活性。数据可用性：数据可从文本中引用的公共来源获得。JEL分类：M41；M52。
期刊介绍：
The mission of the Journal of Management Accounting Research (JMAR) is to advance the theory and practice of management accounting through publication of high-quality applied and theoretical research, using any well-executed research method. JMAR serves the global community of scholars and practitioners whose work impacts or is informed by the role that accounting information plays in decision-making and performance measurement within organizations. Settings may include profit and not-for profit organizations, service, retail and manufacturing organizations and domestic, foreign, and multinational firms. JMAR furthermore seeks to advance an understanding of management accounting in its broader context, such as issues related to the interface between internal and external reporting or taxation. New theories, topical areas, and research methods, as well as original research with novel implications to improve practice and disseminate the best managerial accounting practices are encouraged.
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