Why do CFOs become involved in material accounting manipulations?
AbstractThis paper examines why CFOs become involved in material accounting manipulations. We find that while CFOs bear substantial legal costs when involved in accounting manipulations, these CFOs have similar equity incentives to the CFOs of matched non-manipulation firms. In contrast, CEOs of manipulation firms have higher equity incentives and more power than CEOs of matched firms. Taken together, our findings are consistent with the explanation that CFOs are involved in material accounting manipulations because they succumb to pressure from CEOs, rather than because they seek immediate personal financial benefit from their equity incentives. AAER content analysis reinforces this conclusion.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Accounting and Economics.
Volume (Year): 51 (2011)
Issue (Month): 1-2 (February)
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Web page: http://www.elsevier.com/locate/jae
Earnings quality Accounting manipulation CFO turnover CEO power Incentive compensation;
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