The relation between CEO equity incentives and the quality of accounting disclosures: New evidence

50 Pages Posted: 25 Jan 2017 Last revised: 19 Jan 2021

See all articles by Karen H. Wruck

Karen H. Wruck

Ohio State University - Fisher College of Business, Department of Finance

YiLin Wu

National Taiwan University - Department of Economics

Date Written: DECEMEBER 08, 2020

Abstract

This paper provides new evidence on the negative relation between CEO equity incentives and accounting disclosure quality. We analyze a comprehensive set of disclosure quality variables, including discretionary accruals quality, the quantity and quality of voluntary disclosures, fineness of reported financial statement information, and the narrative quality of regulatory filings, and use them to create information disclosure quality indices. We address the potential endogeneity of CEO equity incentives by conducting two-stage least squares/IV models and natural experiments created by situations in which there is an exogenous shock to the use or value of CEO stock options. Our results are robust to subsample analyses and to alternative measures of the incentives created by CEO options.

Keywords: Accounting disclosure quality; Readability; Textual analysis; Equity incentives; CEO stock options; Vega.

JEL Classification: D22; J33; J41; M40; M52

Suggested Citation

Wruck, Karen H. and Wu, YiLin, The relation between CEO equity incentives and the quality of accounting disclosures: New evidence (DECEMEBER 08, 2020). Charles A. Dice Center Working Paper No. 2017-02, Fisher College of Business Working Paper No. 2017-03-002, Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2905243 or http://dx.doi.org/10.2139/ssrn.2905243

Karen H. Wruck (Contact Author)

Ohio State University - Fisher College of Business, Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-4330 (Phone)
614-292-2418 (Fax)

HOME PAGE: http://https://fisher.osu.edu/people/wruck.1

YiLin Wu

National Taiwan University - Department of Economics ( email )

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
504
Abstract Views
2,571
Rank
106,365
PlumX Metrics