Abstract

References (68)

Beta

Citations (1)

Beta

One-Click Download | Share | Email | Add to Briefcase

Myopic Corporate Boards: Evidence from CEO Pay Around SOX

Katherine Guthrie
College of William and Mary - Mason School of Business

Illoong Kwon
University at Albany, SUNY

Jan Sokolowsky
University of Michigan

August 6, 2009

Abstract:
We develop a principal-agent model linking CEO incentive pay to overstatements that allows us to differentiate between boards that prevent and boards that encourage overstatements. Using the Sarbanes-Oxley Act of 2002 as an exogenous increase in the cost of overstatements, we infer from the observed decrease in CEO incentives that boards must benefit from overstatements. Empirical proxies for board benefits from overstatements are also indicative of higher CEO incentives in the cross-section, and the decrease in CEO incentives around SOX is concentrated in firms whose boards are more likely to benefit from overstatements.

Keywords: principal, agent, SOX, CEO, pay, incentives, pay-for-performance, board, director, corporate governance, overstatement, myopia

JEL Classifications: G34, M41

Working Paper Series

Date posted: September 10, 2009 ; Last revised: October 16, 2009

Suggested Citation

Guthrie, Katherine, Kwon, Illoong and Sokolowsky, Jan, Myopic Corporate Boards: Evidence from CEO Pay Around SOX (August 6, 2009). Available at SSRN: http://ssrn.com/abstract=1471283

Export to: Export Citation What's this?

Contact Information

Katherine Guthrie (Contact Author) College of William and Mary - Mason School of Business ( email ) P.O. Box 8795 Williamsburg, VA 23187-8795 United States 7572212832 (Phone)
Illoong Kwon University at Albany, SUNY ( email ) 1400 Washington Avenue Department of Economics Albany, NY 12222 United States HOME PAGE: http://www.albany.edu/~ik325357/
Jan Sokolowsky University of Michigan ( email ) 611 Tappan Street Ann Arbor, MI 48109-1220 United States