Please use this identifier to cite or link to this item:
Association between CD&A Tone and the Say-on-Pay Provision
|Issue Date: ||2019-07-01 10:42:30 (UTC+8)|
|Abstract: ||薪酬發言權制度(Say-on-Pay)賦予股東可對高階主管的薪酬表示支持或反對意見的權利，該投票的結果會對公司的經營構成壓力。薪酬討論及分析(Compensation Discussion & Analysis, CD&A)對於高階主管薪酬的制定有詳盡的解釋，影響了股東對公司薪酬計畫的認知進而影響投票的結果。|
Say-on-Pay provision entitles shareholders to exercise advisory vote on executive compensation program. Either a loss in the Say-on-Pay vote or even a marginal pass is costly to firms because of investor outrage and potential litigation risk. Thus, firms have incentives to manage contents illustrated in Compensation Discussion and Analysis (CD&A) in order to influence shareholders’ perception about the compensation program with a goal of affecting shareholders’ voting decisions. In this study, I investigate the effect of Say-on-Pay provision on CD&A tone and whether Say-on-Pay affects the relation between CD&A tone and pay performance. I conduct tests using a sample of S&P 500 companies in the pre- and post-Say-on-Pay regimes.
The results show that tone in CD&A tends to be more negative after the implementation of Say-on-Pay and is negatively related to pay performance in the post-Say-on-Pay period. These findings are consistent with my conjecture that Say-on-Pay provides incentives for firms to manage CD&A tone to manipulate shareholder’s perceptions about the alignment between firm performance and CEO compensation. Furthermore, I find that firms with lower ROA, greater managerial ownership, less independent board, and larger board are more likely to manipulate tone to justify pay performance in the post-Say-on-Pay regime. Overall, this study provides some regulatory implications for Say-on-Pay regulation.
|Reference: ||Aggarwal, R. K., and A. A. Samwick. 1999. Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence. The Journal of Finance 54(6): 1999-2043.|
Balsam, S., J. Boone, H. Liu, and J. Yin. 2016. The Impact of Say-on-Pay on Executive Compensation. Journal of Accounting and Public Policy 35(2): 162-191.
Bebchuk, L.A., and J. M. Fried. 2003 Executive Compensation as an Agency Problem. Journal of Economic Perspectives 17(3): 71-92
Bizjak, J. M., J. A. Brickley, and J. L.Coles. 1993. Stock-based Incentive Compensation and Investment Behavior. Journal of Accounting and Economics 16(1): 349-372
Burns, N. and K. Minnick. 2013. Does Say‐on‐Pay Matter? Evidence from Say‐on‐Pay Proposals in the United States. Financial Review 48(2): 233-258.
Brunarski, K. R., T. C. Campbell, and Y. S. Harman. 2015. Evidence on the Outcome of Say-On-Pay Votes: How Managers, Directors, and Shareholders Respond. Journal of Corporate Finance 30: 132-149
Cai, J., and R. A. Walkling. 2011. Shareholders’ Say on Pay: Does It Create Value? Journal of Financial and Quantitative Analysis 46(02): 299-339.
Chen, H., D. Jeter, and Y. W Yang. 2015. Pay-performance Sensitivity Before and After SOX. Journal of Accounting and Public Policy 34(1): 52-73.
Cichello, M. S. 2005. The Impact of Firm Size on Pay–performance Sensitivities. Journal of Corporate Finance 11(4): 609-627
Core, J. E., R. W. Holthausen, and D. F. Larcker. 1999. Corporate Governance, Chief Executive Officer Compensation, and Firm Performance. Journal of Financial Economics 51 (3): 371-406
Cuñat, V., M. Giné, and M. Guadalupe. 2016. Say Pays! Shareholder Voice and Firm Performance. Review of Finance 20 (5): 1799–1834
Davis, A., and I. Tama-Sweet. 2012. Managers’ use of Language Across Alternative Disclosure Outlets: Earnings Press Releases versus MD&A. Contemporary Accounting Research 29: 804–837.
Davis, A., J. Piger, and L. Sedor. 2012. Beyond the Numbers: Managers’ use of Optimistic and Pessimistic Tone in Earnings Press Releases. Contemporary Accounting Research 29: 845–868.
Ertimur, Y., F. Ferri, and D. Oesch. 2013. Shareholder Votes and Proxy Advisors: Evidence from Say on Pay. Journal of Accounting Research 51(5): 951-996
Fahlenbrach, R. 2009. Shareholder Rights, Boards, and CEO Compensation. Review of Finance 13(1) 81-113
Feldman, R., S. Govindaraj, J. Livnat, and B. Segal. 2009. Management’s Tone Change, Post Earnings Announcement Drift and Accruals. Review of Accounting Studies 15: 915–953.
Finkelstein, S. and D. C. Hambrick. 1989. Chief Executive Compensation: A Study of the Intersection of Markets and Political Processes. Strategic Management Journal 10: 121–134.
Frydman, C. and D. Jenter. 2010. CEO Compensation. Annual Review of Financial Economics 2: 75-102.
Henry, E. 2008. Are Investors Influenced by How Earnings Press Releases Are Written? Journal of Business Communication 45: 363–407.
Huang, X., S. H. Teoh, and Y. Zhang. 2014. Tone Management. The Accounting Review 89(3): 1083-1113
Hwang, BH. and S. Kim. 2009. It Pays to Have Friends. Journal of Financial Economics 93(1):138-158
Jackson, S. B., T. J. Lopez, and A. L. Reitenga. 2008. Accounting Fundamentals and CEO Bonus Compensation. Journal of Accounting and Public Policy 27(5): 374-393.
Jensen, M. C. and W. H. Meckling. 1976. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics 3(4): 305-360
Jensen, M. C. and K. J. Murphy. 1990. Performance Pay and Top Management Incentives. Journal of Political Economy 98(2): 225-264
John, T. A and K. John. 1993. Top-Management Compensation and Capital Structure. Journal of finance 48(3): 949-974
Kimbro, M.B. and D. Xu. 2016. Shareholders Have a Say in Executive Compensation: Evidence from Say-on-Pay in the United States. Journal of Accounting and Public Policy 35(1): 19-42
Kothari, S., X. Li, and J. Short. 2009. The Effect of Disclosures by Management, Analysts, and Financial Press on the Equity Cost of Capital: A Study Using Content Analysis. The Accounting Review 84: 1639–1670.
Laksmana, I., W. Tietz, and Y. W. Yang. 2012. Compensation Discussion and Analysis (CD&A): Readability and Management Obfuscation. Journal of Accounting and Public Policy 31(2): 185-203
Leone, A. J., J. S. Wu, and J. L. Zimmerman. 2006. Asymmetric Sensitivity of CEO Cash Compensation to Stock Returns. Journal of Accounting and Economics 42(1): 167-192.
Lewellen, W. and B. Huntsman.1970. Managerial Pay and Corporate Performance. American Economic Review 60(4): 710-20.
Li, F. 2008. Annual Report Readability, Current Earnings, and Earnings Persistence. Journal of Accounting and Economics 45(23), 221-247
Li, F. 2010. The Information Content of Forward‐Looking Statements in Corporate Filings—A Naïve Bayesian Machine Learning Approach. Journal of Accounting Research 48(5): 1049-1102
Lipton, M. and J. W. Lorsch. 1992. A Modest Proposal for Improved Corporate Governance. Business Lawyer 48, 59–77.
Loughran, T. and B. McDonald. 2011. When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10-Ks. Journal of Finance 66: 35–65.
Mangen, C. and M. Magnan. 2012. ‘‘Say on Pay”: A Wolf in Sheep’s Clothing? Academy of Management Executive 26 (2), 86–104.
Mehran, H. 1995. Executive Compensation Structure, Ownership, and Firm Performance. Journal of Financial Economics 38(2):163-184
Murphy, K. J. 1985. Corporate Performance and Managerial Remuneration: An Empirical Analysis. Journal of Accounting and Economics 7:11-42
Price, S., J. S. Doran, D. R. Peterson, and B. A. Bliss. 2012. Earnings Conference Calls and Stock Returns: The Incremental Informativeness of Textual Tone. Journal of Banking and Finance 36: 992–1011.
Rogers, J., A. Van Buskirk, and S. Zechman. 2011. Disclosure Tone and Shareholder Litigation. The Accounting Review 86(6): 2155-2183
Schaefer S., 1998.The Dependence of pay—Performance Sensitivity on the Size of the Firm. Review of Economics and Statistics 80(3): 436-443
Semler Brossy Consulting Group, LLC, 2018. 2018 Say on Pay and Proxy Results. Available at https://www.semlerbrossy.com/wp-content/uploads/SBCG-2018-SOP-Report-06-06-2018.pdf
Smith, C. W. and R. L. Watts. 1992. The Investment Opportunity Set and Corporate Financing, Dividend, and Compensation Policies. Journal of Financial Economics 32(3): 263-292
Tetlock, P. 2007. Giving Content to Investor Sentiment: The Role of Media in the Stock Market. Journal of Finance 62: 1139–1167.
Yermack, D. 1996. Higher Market Valuation of Companies with a Small Board of Directors. Journal of Financial Economics 40: 185–211.
Weisbach, M. S. 1988. Outside Directors and CEO Turnover. Journal of Financial Economics 20: 431-460
|Source URI: ||http://thesis.lib.nccu.edu.tw/record/#G0106353106|
|Data Type: ||thesis|
|Appears in Collections:||[會計學系] 學位論文|
Files in This Item:
All items in 政大典藏 are protected by copyright, with all rights reserved.