IDEAS home Printed from https://ideas.repec.org/p/ecl/stabus/2052.html
   My bibliography  Save this paper

Performance-Based Incentives for Internal Monitors

Author

Listed:
  • Armstrong, Christopher S.

    (University of Pennsylvania)

  • Jagolinzer, Alan D.

    (Stanford University)

  • Larcker, David F.

    (Stanford University)

Abstract

This study examines the use of performance-based incentives for internal monitors (general counsel and chief internal auditor) and whether these incentives impair monitors' independence by aligning their interests with the interests of those being monitored. We find evidence that incentives are greater when monitors' job duties contribute more to the firm's production function, when other top managers receive greater incentives, and when a firm has lower expected litigation risk. We also find evidence that firms provide more incentives when there is greater demand for internal monitoring. We find no evidence that internal monitor incentives impair the monitoring function. Instead, our results suggest that adverse firm outcomes (e.g., regulatory enforcement actions and internal-control material-weakness disclosures) occur less frequently at firms that provide greater monitor incentives.

Suggested Citation

  • Armstrong, Christopher S. & Jagolinzer, Alan D. & Larcker, David F., 2010. "Performance-Based Incentives for Internal Monitors," Research Papers 2052, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:2052
    as

    Download full text from publisher

    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP2052.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.
    2. Sara Melendy & Ronald J. Huefner, 2011. "Monitoring Legal Compliance: The Growth of Compliance Committees," Accounting Perspectives, John Wiley & Sons, vol. 10(4), pages 241-263, December.
    3. Friedman, Henry L., 2014. "Implications of power: When the CEO can pressure the CFO to bias reports," Journal of Accounting and Economics, Elsevier, vol. 58(1), pages 117-141.
    4. Serena Gallo, 2021. "Fintech platforms: Lax or careful borrowers’ screening?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-33, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:stabus:2052. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/gsstaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.