Projects per year
The 2006 SEC rule, by changing the definition of Named Executive Officers, mandates CFO compensation disclosure. Using this setting and a difference-in-differences research design, we study the real effects of CFO compensation disclosure regulation on CFO job performance. We hypothesize that the disclosure of CFO compensation information, by facilitating shareholder monitoring of the board in providing appropriate incentives to CFOs, leads to better CFO job performance in providing high-quality financial reports. The analyses support our prediction: the treatment firms, which start disclosing CFO compensation information under the 2006 rule, compared to the control firms, which already disclose CFO compensation before 2006, experience an improvement in CFO performance, as exhibited in decreases in accounting misstatements and unexplained audit fees. The results are more pronounced for firms with concentrated ownership, smaller compensation committees, and CFOs subject to weaker monitoring by audit committees. Overall, we provide evidence of a real effect resulting from mandatory CFO compensation disclosure.
Bibliographical noteFunding Information:
This paper is previously circulated under the title “Does Compensation Disclosure Lead to Better Job Performance? Evidence from Mandatory CFO Compensation Disclosure”. We appreciate the helpful comments of Igor Goncharov, Yongtae Kim, Siqi Li, Jongwon Park, Grace Pownall, Suresh Radhakrishnan, Katherine Schipper, Tomomi Takada, Feng Tian, Rimmy Tomy (discussant), Steven Young and participants at the 2019 Hawaii Accounting Research Conference, 2019 AAA Conference, and at the workshops of Hong Kong Baptist University, Kobe University, Lancaster University and Santa Clara University. The work described in this paper was supported by a grant (General Research Fund 13500517) from the Research Grant Council of the Hong Kong SAR, China. Part of the work is done when Nancy Su was affiliated with Lingnan University and Dichu Bao was affiliated with Deakin University.
© 2022 Elsevier Inc.
FingerprintDive into the research topics of 'The real effects of disclosure regulation: Evidence from mandatory CFO compensation disclosure'. Together they form a unique fingerprint.
- 1 Finished
SU, L. N., BAO, D. & ZHANG, Y.
1/01/18 → 30/06/20
Project: Grant Research