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Clawback provisions, equity-based compensation, and audit committees' oversight effectiveness
Lin, Yu Chun
Yu, Hung Chao
Lin, Yu Chun
Audit Committee Compensation
|Issue Date: ||2012-10-30 14:21:12 (UTC+8)|
|Abstract: ||This study first examines whether equity-based compensation (i.e., stocks and options) is associated with audit committees’ oversight failures. I then examine whether this association between equity-based compensation and oversight failures is affected when firms initiate the clawback provisions in their compensation contracts. I use the likelihood of restatements, the incidence of internal control weaknesses (ICW), and earnings management measures to proxy for audit committees’ oversight failures. Based on a sample of 129 firms that voluntarily adopt the clawback provisions during 2003-09 and a matched sample created from the propensity score matching technique, I find several important results. First, larger amounts and portions of stocks and options are associated with higher restatement and ICW likelihood and greater earnings management. Second, equity-based compensation appears to harm audit committees' oversight effectiveness. However, the adoption of the clawback provisions significantly mitigates such negative effect. Finally, the clawback provisions are effective in reducing restatements, ICW, and earnings management only when these provisions are triggered by "bad faith" rather than restatements. Overall, my empirical results bear policy implications on audit committees’ compensation practice and the mandatory adoption of the clawback provisions.|
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|Source URI: ||http://thesis.lib.nccu.edu.tw/record/#G0095353503|
|Data Type: ||thesis|
|Appears in Collections:||[會計學系] 學位論文|
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