The Effects of Corporate Reputation and Compensation Disclosure on Investor Judgments

34 Pages Posted: 8 Jan 2019 Last revised: 14 Aug 2019

See all articles by Poh-Sun Seow

Poh-Sun Seow

Singapore Management University - School of Accountancy

Clarence Goh

Singapore Management University - School of Accountancy

Gary Pan

Singapore Management University - School of Accountancy

Date Written: January 7, 2019

Abstract

Regulators have increased the disclosure requirements of top executives as part of corporate governance reform. This study examines how trust arising from a firm’s corporate reputation will interact with top executive compensation disclosure to influence investor judgments. This study used a 2 X 2 between subjects experimental design, with corporate reputation (good versus bad) and pay ratio (high versus low) as independent variables to test the hypotheses. The key findings show that if the firm with a good corporate reputation discloses a high pay ratio, participants punished the good reputation firm more than the bad reputation firm, demonstrating a negative violation of expectations. On the other hand, if the firm with a bad corporate reputation discloses a low pay ratio, participants rewarded the bad reputation firm more than the good reputation firm, demonstrating a positive violation of expectations. The results of this study may be limited by its particular circumstances of corporate reputation and compensation disclosure, making generalizations of the findings to other settings difficult.

Keywords: corporate reputation, executive compensation disclosure, investor judgments

Suggested Citation

Seow, Poh-Sun and Goh, Clarence and Pan, Gary, The Effects of Corporate Reputation and Compensation Disclosure on Investor Judgments (January 7, 2019). 2019 Canadian Academic Accounting Association (CAAA) Annual Conference; Singapore Management University School of Accountancy Research Paper No. 2019-103. Available at SSRN: https://ssrn.com/abstract=3311443 or http://dx.doi.org/10.2139/ssrn.3311443

Poh-Sun Seow (Contact Author)

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore, 178900
Singapore

HOME PAGE: http://accountancy.smu.edu.sg/faculty/profile/76099/SEOW-Poh-Sun

Clarence Goh

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

Gary Pan

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

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