Rank-and-File Accounting Employee Incentives and Financial Reporting Quality

Chris Armstrong, John D. Kepler, David F. Larcker and Shawn Shi
Additional contact information
Chris Armstrong: Stanford Graduate School of Business
John D. Kepler: Stanford Graduate School of Business
David F. Larcker: Stanford Graduate School of Business
Shawn Shi: Stanford Graduate School of Business and University of Washington

Research Papers from Stanford University, Graduate School of Business

Abstract: An extensive literature examines whether senior executives’ contractual incentives influence their financial reporting decisions. However, little is known about whether— and how—the incentives of lower-level (or “rank-and-file†) employees, who are perhaps even more directly involved in the financial reporting process, influence their behavior. We use a proprietary database with detailed, employee-specific information about these employees’ incentive-compensation plans and find that although firms with relatively well-paid accounting employees tend to issue higher quality financial reports, their reports tend to be of lower quality when these employees’ compensation is contingent rather than fixed. We also find that these relationships are more pronounced at firms whose senior executives have stronger contractual incentives to misreport, which sheds light on when lower-level accounting employees have incentives to promote, discourage, or thwart financial misreporting.

JEL-codes: G34 M12 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-acc and nep-hrm
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://dx.doi.org/10.2139/ssrn.4100807

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:4023

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().