...The impact of performance-based compensation on misreporting Natasha Burns and Simi Kedia * * Burns is at University of Georgia, Terry College of Business, Athens, GA. 30602, e-mail: nburns@uga.edu. Kedia is at Harvard University, Harvard Business School, Boston, MA 02163, e-mail: skedia@hbs.edu. This paper combines the results of two earlier papers: “Does performance-based compensation explain restatements” by Natasha Burns and “Do Executive Stock Options Generate Incentives for Earnings Management? Evidence from Accounting Restatements” by Simi Kedia. We thank Jean Helwege, Andrew Karolyi, and René Stulz for their comments and advice. We also thank Jim Hsieh, Kose John, Steven Kaplan, Kevin Murphy, Prabhala, Jeremy Stein, Christof Stahel, Ralph Walking, Karen Wruck, David Yermack, participants at the 2003 NBER Universities Research Conference of Corporate Governance, the 2004 AFA Meetings in San Diego, seminars at Arizona State University, Baruch College, Indiana University, Ohio State University, Penn State University, Rice University, Rutgers University, Southern Methodist University, University of Georgetown, University of Houston, University of Illinois, and University of Pittsburgh for helpful comments. All errors are the responsibility of the authors. The Impact of performance-based compensation on misreporting Abstract This paper examines the effect of CEO compensation contracts on misreporting. We find that the sensitivity of the CEO’s option portfolio...
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...Keynesian Economics, Helping the US Economy Keynesian philosophy states that in order to manage economic downturns, government intervention in the economy is imperative. It was Keynesian Economic Philosophy that kept America out of another depression during the Great Recession due to the fiscal and monetary stimulus (Seidman 32-53, 22p). By examining the government’s need for spending money on welfare, cutting taxes, regulating and monitoring the financial markets, and government spending on military, America sees how a Keynesian approach is a necessity. The American Government needs to continue using the Keynesian model in order to enhance the performance of the economy. Keynesian Philosophy provides government assisted programs to those who qualify. One form of assistance is Welfare. Welfare provides benefits and economic assistance to low or no income Americans. With the dismal economy, there are now over 100 million people on welfare according to the Census Bureau; and this doesn’t include those receiving Social Security or Medicare (GOPUSAStaff). Food Stamps are one of many divisions of welfare. The food stamps program, also known as the Supplementary Nutrition Assistance Program (SNAP), helps low or no income citizens buy food. There are over 46 million people on SNAP as of June, 2012 (Luhby). That is more than one in seven Americans and more than 25% of eligible Americans do not participate in the food stamps program. There are millions of low-income seniors struggling...
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...code techniques and then works through 18 linked list problems covering a wide range of difficulty. Most obviously, these problems are a way to learn about linked lists. More importantly, these problems are a way to develop your ability with complex pointer algorithms. Even though modern languages and tools have made linked lists pretty unimportant for day-to-day programming, the skills for complex pointer algorithms are very important, and linked lists are an excellent way to develop those skills. The problems use the C language syntax, so they require a basic understanding of C and its pointer syntax. The emphasis is on the important concepts of pointer manipulation and linked list algorithms rather than the features of the C language. For some of the problems we present multiple solutions, such as iteration vs. recursion, dummy node vs. local reference. The specific problems are, in rough order of difficulty: Count, GetNth, DeleteList, Pop, InsertNth, SortedInsert, InsertSort, Append, FrontBackSplit, RemoveDuplicates, MoveNode, AlternatingSplit, ShuffleMerge, SortedMerge, SortedIntersect, Reverse, and RecursiveReverse. Contents Section 1 — Review of basic linked list code techniques Section 2 — 18 list problems in increasing order of difficulty Section 3 — Solutions to all the problems 3 10 20 This is document #105, Linked List Problems, in the Stanford CS Education Library. This and other free educational materials are available at http://cslibrary.stanford.edu/. This document...
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...79C FINANCIAL REPORTING QUALITY AND CORPORATE GOVERNANCE: THE PORTUGUESE COMPANIES EVIDENCE Cristina Gonçalves Góis Senior Lecture Instituto Superior de Contabilidade e Administração de Coimbra Instituto Politécnico de Coimbra Área temática: C) Dirección y Organización Palabras clave: gobierno corporativo; la calidad contable; información financiera; 1 FINANCIAL REPORTING QUALITY AND CORPORATE GOVERNANCE: THE PORTUGUESE COMPANIES EVIDENCE. ABSTRACT The main objective of this paper is to analyze the relationship between the composition and characteristics of corporate governance on the financial reporting quality of Portuguese companies. The major reference case studies on the relationship between corporate governance and the financial reporting quality are not validated by the results obtained. The results show that the board composition changes and its degree of independence do not produce any influence on the quality of the accounting information. Our study shows that although the main international guidelines relating to the rules of good governance have been followed closely by Portuguese institutions, the actual implementation of these rules did not occur. 2 1. INTRODUCTION The aim of this paper is to contribute to the study of the influence of the type of corporate governance on the financial reporting quality in countries with a tradition of continental accounting. Despite the profuse literature about this topic, adapted to Anglo-Saxon...
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...Received in revised form 22 December 2009 Accepted 18 January 2010 Available online 2 February 2010 We show that SEO firms engage in real activities manipulation, and the decline in postSEO performance due to the real activities management is more severe than that due to accrual management. Our evidence is important, because it shows that post-SEO operating underperformance is driven not just by accrual reversals, but also reflects the real consequences of operational decisions made to manage earnings. We also show how firms’ choices of real versus accrual-based earnings management activities around SEOs vary predictably as a function of the firm’s ability to use accrual management and the costs of doing so. & 2010 Elsevier B.V. All rights reserved. JEL Classification: G14 G32 M4 M41 Keywords: Seasoned equity offerings Earnings management Accounting choices Accounting Accruals Real activities 1. Introduction In this paper, we examine both real and accrual-based earnings management activities around seasoned equity offerings (SEOs). Prior research has documented that SEOs are associated with earnings management and subsequent declines in operating performance (e.g., Rangan, 1998; Teoh et al., 1998; Shivakumar, 2000; DuCharme et al., 2004). These studies focused exclusively on accrual-based manipulation, and they attributed the post-SEO performance decline primarily to...
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...ACCOUNTING FRAUDS CONTENTS WHAT ARE FRAUDS? | WHAT ARE ACCOUNTING FRAUDS? | NOTABLE FRAUDS | NOTABLE OUTCOMES | MANIPULATION & FALSIFICATION OF RECORDS | MISAPPROPRIATION OF CASH BALANCES | MISAPPROPRIATION OF GOODS | TEEMING & LADING | WINDOW DRESSING | SECRET RESERVES | ENRON FRAUD | WORLDCOM FRAUD | WHAT ARE FRAUDS ??? FRAUDS AND THEIR CHARACTERISTICS Misstatements in the financial statements can arise from fraud. In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual, Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud Industries most commonly effected by fraud are banking, manufacturing, and government. Fraud can be committed through many media, including mail, wire, phone, and the Internet (computer crime and Internet fraud). * The term “fraud” refers to an intentional act by one or more individuals among management, those charged with governance, employees or third parties, involving the use of deception to obtain an unjust or illegal advantage. Although fraud is a broad legal concept, the auditor is concerned with fraudulent acts that cause a material misstatement in the financial statements. Misstatement of the financial statements may not be the objective of some frauds. Auditors do not make legal determinations of whether fraud has actually occurred. Fraud involving one or more members of...
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...Received in revised form 22 December 2009 Accepted 18 January 2010 Available online 2 February 2010 We show that SEO firms engage in real activities manipulation, and the decline in postSEO performance due to the real activities management is more severe than that due to accrual management. Our evidence is important, because it shows that post-SEO operating underperformance is driven not just by accrual reversals, but also reflects the real consequences of operational decisions made to manage earnings. We also show how firms’ choices of real versus accrual-based earnings management activities around SEOs vary predictably as a function of the firm’s ability to use accrual management and the costs of doing so. & 2010 Elsevier B.V. All rights reserved. JEL Classification: G14 G32 M4 M41 Keywords: Seasoned equity offerings Earnings management Accounting choices Accounting Accruals Real activities 1. Introduction In this paper, we examine both real and accrual-based earnings management activities around seasoned equity offerings (SEOs). Prior research has documented that SEOs are associated with earnings management and subsequent declines in operating performance (e.g., Rangan, 1998; Teoh et al., 1998; Shivakumar, 2000; DuCharme et al., 2004). These studies focused exclusively on accrual-based manipulation, and they attributed the post-SEO performance decline primarily to...
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...ARTICLE IN PRESS Journal of Financial Economics 84 (2007) 330–357 www.elsevier.com/locate/jfec Politically connected CEOs, corporate governance, and Post-IPO performance of China’s newly partially privatized firms$ Joseph P.H. Fana,Ã, T.J. Wonga, Tianyu Zhangb a The Chinese University of Hong Kong, Shatin, N.T., Hong Kong b City University of Hong Kong, Kowloon, Hong Kong Received 19 August 2005; received in revised form 31 January 2006; accepted 6 March 2006 Available online 24 January 2007 Abstract Almost 27% of the CEOs in a sample of 790 newly partially privatized firms in China are former or current government bureaucrats. Firms with politically connected CEOs underperform those without politically connected CEOs by almost 18% based on three-year post-IPO stock returns and have poorer three-year post-IPO earnings growth, sales growth, and change in returns on sales. The negative effect of the CEO’s political ties also show up in the first-day stock return. Finally, firms led by politically connected CEOs are more likely to appoint other bureaucrats to the board of directors rather than directors with relevant professional backgrounds. r 2007 Elsevier B.V. All rights reserved. JEL classification: G34; L33; P31 Keywords: Political connections; Corporate governance; IPO performance; Partial privatization; China We appreciate helpful comments from Stijn Claessens, Mara Faccio, Simon Johnson, Florencio Lopez-deSilanes, John McConnell, Randall Morck, Harold Mulherin...
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...NiCE Working Paper 09-108 April 2009 Quality of Financial Reporting: measuring qualitative characteristics Ferdy van Beest Geert Braam Suzanne Boelens Nijmegen Center for Economics (NiCE) Institute for Management Research Radboud University Nijmegen P.O. Box 9108, 6500 HK Nijmegen, The Netherlands http://www.ru.nl/nice/workingpapers 1 Abstract We construct a compound measurement tool to comprehensively assess the quality of financial reporting in terms of the underlying fundamental qualitative characteristics (i.e. relevance and faithful representation) and the enhancing qualitative characteristics (i.e. understandability, comparability, verifiability and timeliness) as defined in ‘An improved Conceptual Framework for Financial Reporting’ of the FASB and the IASB (2008). The operationalization of these qualitative characteristics results in a 21-item index. Using 231 annual reports from companies listed at US, UK, and Dutch stock markets in 2005 and 2007, we test our compound measurement tool on internal validity, inter-rater reliability (Krippendorff’s alpha) and internal consistency (Cronbach’s alpha). Our findings suggest that the measurement tool used in this study is a valid and reliable approach to assess the quality of financial reports. The measurement tool contributes to improving the quality assessment of financial reporting information, fulfilling a request from both the FASB and the IASB (2008) to make the qualitative characteristics operationally...
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...NBER WORKING PAPER SERIES BANK SUPERVISION AND CORPORATE FINANCE Thorsten Beck Asli Demirgüç-Kunt Ross Levine Working Paper 9620 http://www.nber.org/papers/w9620 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 April 2003 This paper’s findings, interpretations, and conclusions are entirely those of the authors and do not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent. We thank J. Boyd, G. Caprio, C. Schenone, seminar participants at the University of Minnesota and the Banco Central de Chile for helpful suggestions. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. ©2003 by Thorsten Beck, Asli Demirgüç-Kunt, and Ross Levine. All rights reserved. Short sections of text not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including ©notice, is given to the source. Bank Supervision and Corporate Finance Thorsten Beck, Asli Demirgüç-Kunt, and Ross Levine NBER Working Paper No. 9620 April 2003 JEL No. G3, L51, O16, G21 ABSTRACT We examine the impact of bank supervision on the financing obstacles faced by almost 5,000 corporations across 49 countries. We find that firms in countries with strong official supervisory agencies that directly monitor banks tend to face greater financing obstacles. Moreover, powerful official supervision tends to...
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...preferences be rated? 7.Sampling design specification - What is the total population? What sample size is necessary for this population? What sampling method to use?- examples: Probability Sampling:- (cluster sampling, stratified sampling, simple random sampling, multistage sampling, systematic sampling) & Nonprobability sampling:- (Convenience Sampling,Judgement Sampling, Purposive Sampling, Quota Sampling, Snowball Sampling, etc. ) 8.Data collection - Use mail, telephone, internet, mall intercepts 9.Codification and re-specification - Make adjustments to the raw data so it is compatible with statistical techniques and with the objectives of the research - examples: assigning numbers, consistency checks, substitutions, deletions, weighting, dummy variables, scale transformations, scale standardization 10.Statistical analysis - Perform various descriptive and inferential techniques (see below) on the raw data. Make inferences from the sample to the whole population. Test the results for statistical significance. 11.Interpret and integrate findings -...
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...Database Design – Final Exam Study Guide Name ________________________________________________ Date ___________________ Part I Directions: Answer each question. 1. What are the benefits the Oracle 10g Database Environment provides for business? Oracle's 10g database management system gives businesses the ability to coordinate and share computing, application, data, storage, or network resources across dynamic and geographically dispersed organizations and in turn save time, resources and money. 2. What services and products does Oracle provide? Information Technology services and products. 3. What is a relational database? A relational database is a group of data stored in tables that are related by means of a common field. 4. What is the difference between application and system software? Provide an example. Systems software consists of low-level programs designed to interact with the computer hardware. Application Software is the code that allows end users to interact with computers, like for instance Firefox for browsing the internet, Microsoft Word for writing documents, Application Express for developing applications and also for accessing and manipulating data in an Oracle Database. 5. How is data extracted from the database? Data is extracted from the database by the SELECT statement. 6. Name two benefits of a career portfolio? • To organize the many details of one's experiences • To help with goal setting 7. What is the difference between a projection, a selection,...
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...The biology of leadership The relation between leadership, psychopathy and hormones Master thesis Economics and Business 8th of August 2012 Name student: Ricardo Westendorp Student number: 294819rw Supervisor: Wouter van den Berg The biology of leadership PREFACE Around October, 2011, I started looking for a subject to graduate on, when a neuro-economical subject, involving the connection of leadership to psychopathy and hormones, crossed my path. I had to jump into it, because this subject matched the field I am interested in. Now, 8 months later, I present you my final work and I have enjoyed working on it. I have to be honest, this product would not have been able to be written if it wasn’t for the help of certain people. Therefore, I would like to use this section, to show my gratitude to some people, that helped me along the way. First of all, I thank the Erasmus School of Economics, for providing the financial support for this research. This research would definitely not have been possible, without the financial support of the ESE. Secondly, I would like to thank my supervisor, Wouter van den Berg, who has supported me, guided me and who has contributed intellectually. I would also like to thank Kashin Hau, who has made great contributions to the construction of the leadership questionnaire. Also, I would like to thank Sarstedt, who provided 500 saliva tubes. I am very thankful for the help of my parents. A great contribution has been made by my parents, Wim Westendorp...
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...Financial Institutions Center Derivatives and Corporate Risk Management: Participation and Volume Decisions in the Insurance Industry by J. David Cummins Richard D. Phillips Stephen D. Smith 98-19 THE WHARTON FINANCIAL INSTITUTIONS CENTER The Wharton Financial Institutions Center provides a multi-disciplinary research approach to the problems and opportunities facing the financial services industry in its search for competitive excellence. The Center's research focuses on the issues related to managing risk at the firm level as well as ways to improve productivity and performance. The Center fosters the development of a community of faculty, visiting scholars and Ph.D. candidates whose research interests complement and support the mission of the Center. The Center works closely with industry executives and practitioners to ensure that its research is informed by the operating realities and competitive demands facing industry participants as they pursue competitive excellence. Copies of the working papers summarized here are available from the Center. If you would like to learn more about the Center or become a member of our research community, please let us know of your interest. Anthony M. Santomero Director The Working Paper Series is made possible by a generous grant from the Alfred P. Sloan Foundation Derivatives and Corporate Risk Management: Participation and Volume Decisions in the Insurance Industry By J. David Cummins Wharton School, University...
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...International Journal of Business and Social Science Vol. 4 No. 13; October 2013 Cooking the Books: The Case of Malaysian Listed Companies Fathilatul Zakimi Abdul Hamid Rohami Shafie Zaleha Othman Wan Nordin Wan Hussin Faudziah Hanim Fadzil School of Accountancy Universiti Utara Malaysia Sintok, 06010 Kedah Malaysia. Abstract Cooking the books refers to fraudulent accounting activities undertaken by a business to falsify its financial statements. Thus, the objectives of this study are to investigate what the cooking-the-books activities carried out by businesses consist of, how they conduct them, and what the impact is on the business and its shareholders. The case study sample companies are two Malaysian companies that had received various awards from reputable third-party organizations. On the other hand, the activities undertaken in both companies have caused them to be labelled as Malaysian mini Enrons. We employ a qualitative research methodology as most prior research employs a quantitative methodology to investigate the determinant factors in businesses’ cooking-the-book activities. The result of the study shows that the managers have used their positions, prior experience, and regulatory loopholes in their activities. Furthermore, the financial report restatement and higher reported earnings are the early warning signals of their activities. As a result of this, the Malaysian Securities Commission has revised the corporate governance code, and among others incorporated...
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