Managerial risk-taking incentives and non-GAAP earnings disclosures

We investigate the association between risk-taking incentives provided by stock-based compensation arrangements and non-GAAP financial disclosures. Controlling for compensation to stock price sensitivity, we find that managers with higher compensation to stock volatility sensitivity (vega) are more...

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Bibliographic Details
Published in:Journal of contemporary accounting & economics 2013-06, Vol.9 (1), p.100-121
Main Authors: Bansal, Naresh, Seetharaman, Ananth, Wang, Xu (Frank)
Format: Article
Language:English
Subjects:
Compensation
Disclosure
Disclosure policy
Earnings
Executive compensation
Financial reporting
GAAP
Managerial incentives
Non-GAAP earnings
Risk-taking
Social costs
Stock prices
Studies
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Summary:We investigate the association between risk-taking incentives provided by stock-based compensation arrangements and non-GAAP financial disclosures. Controlling for compensation to stock price sensitivity, we find that managers with higher compensation to stock volatility sensitivity (vega) are more likely to be associated with voluntary non-GAAP earnings information disclosures. In addition, higher-vega managers are found to be associated with more frequent and less opportunistic non-GAAP earnings information disclosures. Robust to alternative specifications and estimations, our findings suggest that compensation arrangements can encourage managers to make more, higher-quality voluntary non-GAAP disclosures.
ISSN:1815-5669
DOI:10.1016/j.jcae.2013.03.002