Are Lessons Well Learned? Evidence from SEC Enforcement Releases

• 成果类型: Article
• 署名作者: Cao, Wenjiao
• 署名单位: Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2022-0116
• 发表日期: 2025
• 页码: 79-108
• 关键词: executive stock-options; risk-taking; equity incentives; financial-statements; accounting fraud; ceo incentives; Peer groups; COMPENSATION; performance; disclosure

摘要

This paper investigates the impact of accounting and auditing enforcement releases (AAERs) on the compensation policies of nonaccused firms. The investigation focuses on releases in which the SEC mentions top executives' pursuit of wealth through compensation schemes (i.e., compensation mentioned releases (CMRs)). Using a sample of AAERs from 1992 to 2021, I find that peer firms learn from these CMRs and significantly reduce their CEO's delta and vega following CMRs. Peer firms also decrease their performance share grants and extend the vesting periods for option grants, resulting in a decrease in the convex payoff structure of CEO pay. Furthermore, I find evidence that peer firms reduce their CEO's risk-taking incentives to circumvent litigation and prevent misreporting and shareholder scrutiny. Overall, the findings indicate that information describing one firm's misreporting could affect the compensation policies of other firms, suggesting that regulatory enforcement accompanied by public awareness can effectively shape corporate behaviors.