Executive Compensation: New vs. Old Economy and the Impact of NASDAQ Crash and Sarbanes Oxley Act

2008 ◽  
Author(s):  
João Paulo Vieito ◽  
Antonio Melo Cerqueira ◽  
Elísio Brandão ◽  
Walayet A. Khan
Keyword(s):  
Executive Compensation ◽  
Sarbanes Oxley ◽  
Old Economy ◽  
The Impact

scholarly journals Impact of audit quality on the components of executive cash compensation

2017 ◽  
Vol 10 (1) ◽  
pp. 49-62 ◽  
Author(s):  
Guy D. Fernando ◽  
Alex Thevaranjan
Keyword(s):  
Executive Compensation ◽  
Audit Quality ◽  
National Level ◽  
Empirical Support ◽  
Content Type ◽  
Earnings Response Coefficient ◽  
Sarbanes Oxley ◽  
Cash Compensation ◽  
The Impact ◽  
Auditor Specialization

Purpose This paper aims to study the impact of audit quality on the components of executive cash compensation. It is predicted that as audit quality improves, greater emphasis will be placed on the incentive components of cash compensation, and lower emphasis on the salary (fixed) component. Specifically, it is predicted that as audit quality enhances, greater emphasis will be placed on earnings and sales revenues in determining executive cash compensation. Using auditor specialization as a proxy for audit quality, empirical support is provided for all of our predictions. Design/methodology/approach This paper provides empirical support with agency theoretic predictions. Findings This paper developed the following hypotheses: H1 – in executive cash compensation, more weight is being placed on earnings-based measures as auditor specialization improves; H2 – in executive cash compensation, more weight is also being placed on sales revenues as auditor specialization improves; H3 – in executive cash compensation, salary levels decrease as auditor specialization improves; and H4 – the impact of auditor specialization on the weight on earnings, sales and the salary levels is lower in the post-Sarbanes–Oxley Act (SOX) period compared to pre-SOX period. Research limitations/implications First, the article limits itself to cash compensation, while current executive compensation is largely made of equity. Second, the measure of audit quality used, ‘national level auditor specialization’, may not be as effective in the post-SOX era. Practical implications Compensation committees should pay attention to audit quality (in whatever way it may be proxied by) in determining executive compensation. Originality/value This is the first paper to show that audit quality not only improves the earnings response coefficient in firm valuation but also enhances the weight placed on earnings (and sales revenues) in executive compensation.

The impact of Sarbanes–Oxley and Dodd–Frank on executive compensation

2019 ◽  
Vol 20 (3) ◽  
pp. 243-266
Author(s):  
Linda Hughen ◽  
Mahfuja Malik ◽  
Eunsup Daniel Shim
Keyword(s):  
Executive Compensation ◽  
Financial Services ◽  
Fixed Effects ◽  
Regulatory Change ◽  
Total Compensation ◽  
Content Type ◽  
Sarbanes Oxley ◽  
The Government ◽  
The Impact

Purpose The recent economic and political focus on rising income inequality and the extent of government intervention into pay policies has renewed the interest in executive compensation. The purpose of this paper is to examine the impact of changing regulatory landscapes on executive pay and its components. Design/methodology/approach This study examines a recent 23-year period divided into three distinct intervals separated by two major regulatory changes, the Sarbanes–Oxley Act (SOX) and the Dodd–Frank Act. Bonus, long-term and total compensation are separately modeled as a function of each regulatory change while controlling for firm size, performance and year. The model is estimated using panel data with firm fixed effects. An industry analysis is also conducted to examine sector variations. Findings Total compensation increased 29 percent following SOX and 21 percent following Dodd–Frank, above what can be explained by size, firm performance and time. Total compensation increased following both SOX and Dodd–Frank in all industries except for the financial services industry where total compensation was unchanged. Results are robust to using smaller windows around each regulation. Research limitations/implications This study does not seek to determine whether executive compensation is at an optimal level at any point in time. Instead, this study focuses only on the change in executive compensation after two specific regulations. Originality/value The debate over the extent to which the government should intervene with executive compensation has become a frequent part of political and non-political discourse. This paper provides evidence that over the long-term, regulation does not curtail executive compensation. An important exception is that total compensation was restrained for financial services firms following the Dodd–Frank Act.

New Vs. Old Economy: Trends and Determinants of Executive Compensation

2007 ◽  
Author(s):  
João Paulo Vieito ◽  
Antonio Melo Cerqueira ◽  
Elísio Brandão ◽  
Walayet A. Khan
Keyword(s):  
Executive Compensation ◽  
Old Economy

An empirical examination of the impact of the Sarbanes Oxley Act in the reduction of pension expense manipulation

2011 ◽  
Vol 27 (2) ◽  
pp. 233-241 ◽  
Author(s):  
Paula Diane Parker ◽  
Nancy J. Swanson ◽  
Michael T. Dugan
Keyword(s):  
Empirical Examination ◽  
Sarbanes Oxley ◽  
The Impact

scholarly journals The Impact of the Sarbanes-Oxley Act on Shareholders and Managers of Foreign Firms

2011 ◽  
Author(s):  
Jefferson Duarte ◽  
Katie Kong ◽  
Lance A. Young ◽  
Stephan Siegel
Keyword(s):  
Foreign Firms ◽  
Sarbanes Oxley ◽  
The Impact

Does board independence constrain insider opportunism?

2020 ◽  
pp. 031289622094638
Author(s):  
Dewan Rahman ◽  
Robert Faff ◽  
Barry Oliver
Keyword(s):  
Research And Development ◽  
Insider Trading ◽  
Jel Classification ◽  
Independent Directors ◽  
Board Independence ◽  
Exogenous Shocks ◽  
Sarbanes Oxley ◽  
Trading Restrictions ◽  
The Impact ◽  
Identification Strategy

We examine whether insider opportunism is reduced by board independence. Using a sample of 18,194 firm-year observations over the period 1996–2016, we show that board independence constrains opportunistic insider trading. Our identification strategy uses the Sarbanes–Oxley Act of 2002 (SOX Act) and associated changes to the listing rules of NYSE/NASDAQ as a source of exogenous shocks in board independence. Our results are economically significant as insider opportunism declines by about 10.5%. We find that insider trading restrictions is the channel through which board independence reduces insider opportunism. Our additional analyses show that in competitive and R&D (research and development) intensive firms, the impact of board independence on opportunism is less pronounced. We also find that board independence constrains opportunism only in less complex firms. However, in co-opted boards, independent directors are less effective. Overall, we support the monitoring channel of board independence for reducing insider opportunism. JEL Classification: G14, G34, G40

The Impact of Client and Misstatement Characteristics on the Disposition of Proposed Audit Adjustments

2011 ◽  
Vol 30 (2) ◽  
pp. 103-124 ◽  
Author(s):  
Jennifer Joe ◽  
Arnold Wright, and ◽  
Sally Wright
Keyword(s):  
Financial Reporting ◽  
Internal Controls ◽  
Data Availability ◽  
Audit Firm ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Time Period ◽  
Confidentiality Agreement ◽  
Financial Scandals ◽  
The Impact

SUMMARY We present evidence on the resolution of proposed audit adjustments during a unique time period, immediately following several U.S. financial scandals and surrounding calls for reforms in auditing and financial reporting, which culminated in the passage of the Sarbanes-Oxley Act (SOX). During this period, auditors and their clients faced increased scrutiny from investors and regulators. In addition, auditors had to contend with changed incentives, a new external regulator (i.e., the PCAOB), and upcoming annual PCAOB inspections. We extend prior studies by considering a broader range of factors potentially impacting the resolution of proposed adjustments, including the effect of client tenure, strength of internal controls, and repeat adjustments. Data on 458 proposed adjustments are obtained from the working papers of a sample of 163 audit engagements conducted during 2002 by a Big 4 firm. We find that 24.2 percent of proposed adjustments were subsequently waived. The results indicate audit adjustments are more likely to be waived for clients with whom the audit firm has had a longer relationship, although the pattern does not reflect favoring such clients. We also find that adjustments are more likely to be waived for repeat adjustments. Data Availability: Due to a confidentiality agreement with the participating audit firm the data are proprietary.

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