This study investigates how managers' compensation incentives, as measured by equity-based executive compensation and managerial legal liability coverage affect earnings management. The availability of compensatio...
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This study investigates how managers' compensation incentives, as measured by equity-based executive compensation and managerial legal liability coverage affect earnings management. The availability of compensation may encourage managers to adopt more aggressive accounting practices;however, the higher the legal liability managers face, the more it will reduce their willingness to engage in such risk-taking behavior. Once managers mitigate their personal legal liability through directors' and officers' (D&O) liability insurance, they may be more inclined to manipulate reported earnings. We use excess D&O liability insurance coverage as a proxy for managerial liability coverage and test a sample of listed firms in Taiwan where D&O liability insurance purchases are publicly disclosed. We find that managers whose compensation is equity-based are more likely to adopt an opportunistic accounting strategy when they are covered by relatively high levels of D&O liability insurance;this suggests that the primary determination of earnings management is the joint effect of an increase in managers' compensation incentives and a decrease in their legal liability.
Previous empirical evidence provides mixed results on the relationship between corporate environmental performance and the level of environmental disclosures. We revisit similar relations by testing the relationships ...
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Previous empirical evidence provides mixed results on the relationship between corporate environmental performance and the level of environmental disclosures. We revisit similar relations by testing the relationships among corporate hard carbon disclosure, soft carbon disclosure and carbon performance. In particular, we improve the prior literature by using a more rigorous research design to classify the hard carbon disclosure and soft carbon disclosure. We rely on CDP questionnaire 2010 for S&P 500 and use factor analysis to identify hard carbon disclosure and soft carbon disclosure. Our findings imply that following the legitimacy theory firms and managers with lower carbon performance are inclined to disclose more quantitative carbon information. We analysis the reason in that is quantitative carbon information is more intuitive understanding and acceptance for investor. Thus, we argue that future carbon disclosure research including the design of CDP questionnaire should move the focus to quantitative carbon disclosure.
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