The role of accounting conservatism in executive compensation contracts

Autor:	Akinobu Shuto, Atsushi Shiiba, Takuya Iwasaki, Shota Otomasa
Rok vydání:	2018
Předmět:	050208 finance Executive compensation Earnings business.industry media_common.quotation_subject Compensation (psychology) Corporate governance 05 social sciences Accounting 050201 accounting Information environment Accounting conservatism Argument 0502 economics and business Economics Business Management and Accounting (miscellaneous) Quality (business) business Finance media_common
Zdroj:	Journal of Business Finance & Accounting. 45:1139-1163
ISSN:	0306-686X
DOI:	10.1111/jbfa.12350
Popis:	To test the implication of Watts’ (2003) argument that accounting conservatism increases the efficiency of executive compensation contracts, we investigate the relation between accounting conservatism and earnings‐based executive compensation contracts in Japanese firms. We focus on Japanese executive compensation practices because the demand for accounting conservatism is likely to be greater for Japanese than for US firms given the predominance of earnings‐based executive compensation contracts and relatively weak corporate governance of compensation contracts in Japan. We also investigate how the quality of the ex‐ante information environment affects the relation between accounting conservatism and earnings‐based executive compensation contracts. Consistent with our expectations, we find a positive relation between accounting conservatism and the compensation earnings coefficient. We also show that this positive relation is greater for firms with poor ex‐ante information environment. These results suggest that the demand for accounting conservatism is greater for firms that use more earnings‐based executive compensation contracts and have more serious ex‐post settling‐up problems.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::c2a6d9e0026619265f3f6cf7aba16824 https://doi.org/10.1111/jbfa.12350 Zobrazit plný text záznamu Plný text ve formátu PDF Plný text ve formátu HTML
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