Ex Ante Severance Agreements and Earnings Management

• 成果类型: Article
• 署名作者: Brown, Kareen E.
• 署名单位: Brock University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12103
• 发表日期: 2015
• 页码: 897-940
• 关键词: executive-compensation; ANALYSTS FORECASTS; equity incentives; BONUS SCHEMES; performance; RESTATEMENTS; manipulation; DISCRETION; QUALITY; ability

摘要

This research studies whether severance agreements may reduce fraudulent earnings management, and whether severance pay mitigates executives' career concerns. In a sample of large U.S. firms, those with higher severance pay are less likely to be subject to accounting and auditing enforcement releases (AAERs) by the U.S. Securities and Exchange Commission (SEC). Among S&P 500 firms in the post-SOX period with premanaged earnings below analyst forecasts, firms with higher severance pay are less likely to meet/beat the analyst forecast using abnormal accruals. Overall, these results suggest that fear of losing a lucrative severance package, and/or the insurance offered by such a package curbs earnings management.