Are CFO debt-like compensation incentives associated with financial reporting quality? |
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| Institution: | 1. Florida Atlantic University, Boca Raton, FL, USA;2. Marquette University, Milwaukee, WI, USA;1. Culverhouse School of Accountancy, University of Alabama, Tuscaloosa, AL 35487-0220, United States;2. Paul W. Parkison Department of Accounting, Ball State University, Muncie, IN 47304, United States;3. Coggin College of Business, University of North Florida, Jacksonville, FL 32224, United States;4. Knox School of Accountancy, Augusta University, Augusta, GA 30912, United States;1. School of Accounting, College of Business Administration, Florida International University, USA;2. Accounting Department, College of Business, San Francisco State University, USA;3. Department of Accounting, Finance and Economics, College of Business and Public Policy, California State University, Dominguez Hills, USA;1. School of Business, University of Houston – Victoria, Victoria, TX 77901, USA;2. Rm 389, School of Business, University at Albany – SUNY, 1400, Washington Ave, Albany, NY 12222, USA;3. Rm 357, School of Business, University at Albany – SUNY, 1400, Washington Ave, Albany, NY 12222, USA;1. Collins College of Business, University of Tulsa, United States of America;2. Crummer Graduate School of Business, Rollins College, United States of America;3. Saunders College of Business, Rochester Institute of Technology, United States of America;1. San Francisco State University, United States of America;2. University of Memphis, United States of America;1. Department of Accounting, College of Business Administration, University of Texas at San Antonio, San Antonio, TX 78249, United States;2. Gerald W. Schlief School of Accountancy, Stephen F. Austin State University, Nacogdoches, TX 75962, United States |
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| Abstract: | We investigate whether CFO debt-like compensation incentives and their alignment with CEO debt-like compensation incentives are associated with financial reporting quality. He (2015) finds that CEO debt-like compensation incentives are associated with higher financial reporting quality. Consistent with agency theory, we extend He (2015) by considering CFO debt-like compensation incentives. Overall, we find that CFO debt-like compensation incentives are associated with better financial reporting quality while controlling for CEO debt-like compensation incentives. These effects are present when the CEO and CFO compensation incentives are aligned with the same party. Further, the CFO effect dominates that of the CEO when examining discretionary accruals, and complements the CEO effect for accrual quality. However, we are unable to find any evidence of an incremental joint effect from the alignment of the CEO and CFO debt-like compensation incentives. |
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