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

Karen H. Wruck and YiLin Wu

Journal of Corporate Finance, 2021, vol. 67, issue C

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 (search for similar items in EconPapers)
JEL-codes: D22 J33 J41 M40 M52 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:67:y:2021:i:c:s0929119921000158

DOI: 10.1016/j.jcorpfin.2021.101895

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