Mandatory clawback provisions, information disclosure, and the regulation of securities markets

Chan et al. (2012) find that voluntary adoption of compensation clawback provisions is followed by fewer financial restatements and fewer auditor reports of material internal control weaknesses, higher earnings response coefficients, and reduced auditing fees and lags. They conclude that voluntary a...

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Bibliographic Details
Published in:Journal of accounting & economics 2012-10, Vol.54 (2-3), p.197-200
Main Author: Denis, Diane K.
Format: Article
Language:English
Subjects:
Auditors reports
Clawback
Clawbacks
Coefficients
Compensation
Corporate governance
Disclosure
Effectiveness studies
Financial integration
Financial restatements
Regulation
Securities regulations
Stock exchange
U.S.A
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Summary:Chan et al. (2012) find that voluntary adoption of compensation clawback provisions is followed by fewer financial restatements and fewer auditor reports of material internal control weaknesses, higher earnings response coefficients, and reduced auditing fees and lags. They conclude that voluntary adoption of clawback provisions leads to increased financial integrity. Based on these findings they suggest that U.S. government mandated clawback provisions will be effective in reducing material financial misstatements. I offer possible alternative interpretations of CCCY’s results and discuss issues surrounding government regulation of clawback provisions in particular and corporate behavior more generally. ► Alternative explanations for reduced restatements following voluntary clawback adoption. ► Differences between voluntary and government-mandated clawback adoption. ► Potential costs of regulating firms’ responses to material misstatements.
ISSN:0165-4101
1879-1980
DOI:10.1016/j.jacceco.2012.07.002