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Discussion of Corporate Governance Reform and Executive Incentives: Implications for Investments and Risk Taking

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  • Frank H. Selto
  • Marc Cussatt

Abstract

We discuss the strengths and weaknesses of the article by Cohen, Dey and Lys (CDL). Strengths include persuasive theoretical arguments for impacts of the Sarbanes Oxley Act (SOX) on corporate investment strategies and for several mechanisms through which firms influence changes in risky investments. CDL also provides intriguing opportunities for learning about impacts of external regulatory events and for enriching management accounting research and classroom discussions of management control. Weaknesses include (1) narrow scope, perhaps driven by archival data availability; (2) difficulties in implementing the research design and method; (3) possible bias of incentive and investment measures; (4) incomplete estimates of the effect of SOX on compensation, incentives, and investments; and (5) questionable control of endogeneity. We offer recommendations from extant literature to mitigate these weaknesses in future research.

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  • Frank H. Selto & Marc Cussatt, 2013. "Discussion of Corporate Governance Reform and Executive Incentives: Implications for Investments and Risk Taking," Contemporary Accounting Research, John Wiley & Sons, vol. 30(4), pages 1333-1343, December.
    • Handle: RePEc:wly:coacre:v:30:y:2013:i:4:p:1333-1343
    DOI: 10.1111/1911-3846.12017
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    Cited by:

    1. Liu, Wenjun & Lin, Guoyu & He, Qian, 2024. "Enhanced management information disclosure responsibilities and corporate risk-taking: Evidence from the accountability system for errors in China," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 511-531.

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