Managerial Incentives Research Articles

Do firms respond to foreign competitive threats with herding or dispersion?

PurposeThe purpose of this study is to examine firms' response to product market threats from foreign competitors, specifically whether they pursue a strategy of dispersion or herding with regards to their product space and executive-incentive plans.Design/methodology/approachThis study applies a two-stage least squares instrumental variable (IV) approach to address endogeneity concerns. The analyses apply to a sample of 9,719 firm-pairs from 21 manufacturing industries over the period from 2006 to 2015.FindingsFirms attempt to distance themselves from their fellow incumbent firms when facing greater foreign competition, specifically with regards to their product descriptions and the incentives they provide to CEOs. This effect becomes stronger when industry peers are more likely to serve as material threats themselves.Research limitations/implicationsThese results provide encouraging opportunities for future research about the long-run implications of dispersion in local industries. The survival rate tied to the observed strategies in this study, as well as general changes to industry structure are remaining questions of interest.Practical implicationsThe observed responses by incumbent firms in this study offer insights for policymakers on tariff-setting, as tariff adjustments may influence the local product space. Additionally, the related shifts in CEO incentives inform shareholders' contracting decisions.Originality/valueThis study reveals that incumbents’ responses to foreign competition reshape local industry product spaces. Furthermore, this study sheds light on a new link between firms’ product spaces and management incentives.

Optimizing Variables for Contingency Management Among Infant Caregivers Using a Simulated Purchase Task.

Behavioral economics offers a framework for understanding choice making around public health concerns such as drug use and distracted driving. Such a framework could be beneficial to understanding caregiver choices related to arranging an infant sleep environment. Nonadherence to infant sleep safety guidelines provided by the American Academy of Pediatrics increases the risk of sleep-related infant deaths. The present study adopted a willingness-to-accept purchase task procedure, used in previous research to evaluate variables that predict abstaining from consuming alcohol, to evaluate intention to adhere to recommendations for arranging a safe infant sleep environment. This analysis would inform contingency management incentive scales used to measure caregiver adherence following training caregivers to arrange an infant sleep environment and identify variables that might predict treatment engagement. The results identified incentive sizes, condition duration, and participant variables that predict caregiver adherence. The results can be applied to future investigations that train caregivers to arrange an infant sleep environment.

Exploring the relationship between professional roles and behavioural intentions in chronic kidney disease management: a cross-sectional study among primary and specialist health professionals in Shanghai, China

ObjectivesGeneral practitioners, nephrologists and renal nurses play key roles in professional integration in chronic kidney disease (CKD) management. Professional roles may influence professionals’ behavioural intentions, namely, the degree to which...

The influence of earning targets, independent board, and audit committee on earnings management in the Indonesian banking sector

This study investigates the influence of the independent board of commissioners and audit committee on earnings management to achieve earning targets in Indonesian banking. The research sample was drawn from 33 banks listed on the Indonesia Stock Exchange from 2012 to 2022 to evaluate the time frame of the study and its relevance to current banking trends in Indonesia, as well as to examine the data sources used and their reliability. The data analysis method used in this study is a dummy variable regression model. The findings reveal significant insights into the motivations behind earnings management practices. Specifically, this study finds that managers engage in earnings management to meet profit targets, thereby signaling strong performance to stakeholders and potentially securing bonuses. Notably, the influence of corporate governance structures varies: while the independent board of commissioners demonstrates no significant effect on earnings management (p = –0.01), the audit committee plays a pivotal role, significantly influencing earnings management practices (p = –0.017). Moreover, the analysis uncovers that company size has a significant impact on earnings management (p = 0.002), while return on assets (ROA) does not. This study provides empirical evidence demonstrating the efficacy of audit committees in curbing managerial incentives for earnings management to meet targets. Furthermore, by quantifying the influence of corporate governance mechanisms and firm characteristics on earnings management, this study sheds light on key dynamics in the Indonesian banking industry.

The Moderating Effect of Accounting Conservatism on Managerial Ownership and Growth Opportunity Relationship

The application of the accounting conservatism method in the company's financial statements is essential for company managers in their consideration of strategy development. In uncertain global economic conditions, the application of the precautionary principle or accounting conservatism in financial statements is needed to maintain the stability of the company's financial condition. This study aims to test and analyze the effect of managerial ownership and growth opportunities on accounting conservatism with leverage as a moderating variable. This study uses secondary data in the form of annual financial reports on property and real estate sector companies listed on the Indonesia Stock Exchange (IDX) and Indonesian Capital Market Directory. This study used a purposive sampling technique. The results showed that managerial ownership affects accounting conservatism, while growth opportunity does not affect accounting conservatism. For leverage used as a moderating variable, it is unable to moderate the effect of managerial ownership and growth opportunity on accounting conservatism. This study can help investors and regulators understand the role of managerial incentives in shaping financial reporting behavior. Companies and regulators may want to consider ownership structure when evaluating financial transparency and risk.

Principle-Based Standards and Analyst Forecasts: Evidence from China

Synopsis The research problem This paper investigated the impact of principle-based accounting standards on analyst forecasts. Motivation The theoretical and practical debates over whether accounting standards should be more principle-based or rule-based have persisted to this day. Existing research primarily focused on the impact of principle-based standards on managers, auditors, and investors in developed economies. However, whether principle-based standards have played the anticipated positive role in emerging markets with relatively weaker institutional environments—and particularly, how they affect another important participant in financial markets, namely, analysts—is the research gap we wished to further explore. The test hypotheses We tested the following hypotheses: (a) principle-based accounting standards are associated with higher analyst forecast errors; (b) managers’ earnings management incentives and a weak institutional environment exacerbate the negative impact of principle-based standards on analyst forecasts; and (c) analysts’ limited attention and effort aversion exacerbate the negative impact of principle-based standards on analyst forecasts. Target population Financial analysts, accounting standards setting bodies such as IASB and accounting regulators in emerging markets. Adopted methodology We used ordinary least squares regressions, archival data, and textual analysis methods to obtain the initial data. Analyses First, based on firms’ annual reports, we used text analysis methods to construct a firm-level principle-based measurement. Then, we examined the relationship between the degree of a firm’s reliance on principle-based standards and the analyst forecast errors. After obtaining the baseline result, we further discussed the possible mediating effects of accounting information quality and analysts’ subjective mindsets. Finally, we discussed the impact of principle-based standards on other forecasting attributes beyond analyst forecast errors. Findings Using a sample of Chinese listed firms, we found that analysts’ forecast errors are larger for firms that rely more on principle-based standards. Based on the “input-processing-output” model, we found that in the input stage, principle-based standards may become a tool for managers to manipulate accounting earnings in firms with stronger earnings management incentives or that are in weaker institutional environments, leading to higher analyst forecast error, with accounting information quality as an important mediator. During processing, analysts’ limited attention and effort aversion exacerbate the adverse impact of principle-based standards on forecast quality, while analysts’ experience can mitigate this effect. For output results, principle-based standards are also associated with higher forecast dispersion, longer forecast lag, and more forecast revisions. Collectively, our research uncovered some dark sides of principle-based standards in weak institutional environments.

Push-Pull Motivators and Perceived Health Care Quality on Remote Health Management Intentions-Evidence From the Indian Internet Population.

Hospitals offered remote health care services to enable seamless and safe execution of health care operations during the pandemic while ensuring all stakeholders' quality of life and well-being. We explore various push and pull motivational factors that can influence customers' intentions to adopt remote health care services. We also examine the mediating role of perceived health care quality in light of their hedonic experience during the pandemic. We develop our conceptual framework based on push-pull motivational theory and investigate remote health management intentions. We carried out a case study in a multispecialty hospital in India. We collected data from 482 internet users who accessed their remote services during the pandemic, and we performed statistical analysis. Our findings show the push and pull motivators significantly influencing internet populations' remote health management intentions. The results also highlight the mediation of perceived health care quality between push factors and remote health management intentions. The push-pull motivators significantly regulate remote health care intentions among the internet population. Technologists and researchers must address these factors while introducing future remote services to widen adoption. This is one of the pioneering studies investigating people's remote health care intentions post-pandemic.

Analisis Penyebab Internal dan Eksternal dalam Fraudulent Financial Reporting: Studi Tinjauan Literatur

Purpose: This research aims to analyze the internal and external causes that contribute to the occurrence of fraudulent financial reporting through a literature review, focusing on trends, developments, and under-explored areas. Methodology: This study analyzes 100 journals discussing the analysis of internal and external causes in fraudulent financial reporting from 2000 to 2024, sourced from reputable publishers. The research uses a systematic mapping study to identify, map, and categorize topics, methods, and source disciplines in fraudulent financial reporting research. Results: This study found that financial statement fraud is influenced by a combination of internal and external factors. Within the internal factors are poor leadership, management dominance, lack of supervision, unrealistic performance targets, and excessive incentives for management. In external factors there are financial pressures, rapid company growth, and pressure to maintain stock prices. The main finding is the interaction between internal factors and external factors that simultaneously trigger fraud. Limitations: The study is based solely on a literature review of journals from 2000 to 2024, which may limit the scope of the research to the trends and findings presented in those publications. Contribution: The novelty of this study lies in identifying the interaction between internal and external factors that contribute to fraudulent financial reporting and emphasizing the importance of strengthening regulatory oversight and corporate governance to prevent such practices.

Local Government Debt and Managerial Incentives: Evidence from China

Local Government Debt and Managerial Incentives: Evidence from China

Persistent Identifiers for Instruments and Facilities: Current State, Challenges, and Opportunities

Objective: Persistent Identifiers (PIDs) are central to the vision of open science described in the FAIR Principles. However, the use of PIDs for scientific instruments and facilities is decentralized and fragmented. This project aims to develop community-based standards, guidelines, and best practices for how and why PIDs can be assigned to facilities and instruments. Methods: We hosted several online and in-person focus groups and discussions, cumulating in a two-day in-person workshop featuring stakeholders from a variety of organizations and disciplines, such as instrument and facilities operators, PID infrastructure providers, researchers who use instruments and facilities, journal publishers, university administrators, federal funding agencies, and information and data professionals. Results: Our first-year efforts resulted in four main areas of interest: developing a better understanding of the current PID ecosystem; clarifying how and when PIDs could be assigned to scientific instruments and facilities; challenges and barriers involved with assigning PIDs; incentives for researchers, facility managers, and other stakeholders to encourage the use of PIDs. Conclusions: The potential for PIDs to facilitate the discovery, connection, and attribution of research instruments and facilities indicates an obvious value in their use. The lack of standards of how and when they are created, assigned, updated, and used is a major barrier to their widespread use. Data and information professionals can work to create relationships with stakeholders, provide relevant education and outreach activities, and integrate PIDs for instruments and facilities into their data curation and publication workflows.

Are Current Disclosures Current? Evidence from Form 8-K Impairment Filings

Although Form 8-K rules mandate that firms report material events shortly after they occur, a limited safe harbor allows firms to delay disclosure of certain events if they arise or are discovered concurrently with preparation of the upcoming 10-K/Q filing. Additionally, the materiality thresholds used to determine whether a filing is required are subject to managerial discretion. Given these features that provide flexibility in 8-K reporting, our study uses 8-K Item 2.06 Material Impairments as a setting to investigate how frequently firms disclose information on an 8-K, relative to their 10-K/Q disclosures. Using a 2005–2020 sample period, we find that an 8-K Item 2.06 is filed in only 9.84% of firm-quarters with 10-K/Q impairments. We then examine managerial incentives underlying the 8-K Item 2.06 filing choice and find a greater likelihood of filing in quarters where stock options are granted and where insider stock purchases are higher, and a reduced likelihood when raising capital. Further analyses explore the safe harbor and materiality choice as mechanisms, as well as the effect of consecutive losses on the 8-K filing choice. Overall, our study demonstrates the rarity in which firms disclose impairments on a current basis and provides evidence of a relation between managerial incentives and the choice to file an 8-K for mandatory reportable events.

How Do Landowners Perceive and Respond to Incentives for Sustainable Forest Management? A Synthesis to Inform Discussions on Programs for Climate-Smart Forestry

How Do Landowners Perceive and Respond to Incentives for Sustainable Forest Management? A Synthesis to Inform Discussions on Programs for Climate-Smart Forestry

Voluntary Disclosure of Workforce Gender Diversity

ABSTRACT We examine managerial incentives to disclose the gender diversity of a firm’s workforce. We exploit information from employees’ online profiles to infer the gender diversity of nondisclosing firms. Within industry, we find that firms are more likely to disclose gender diversity when women comprise a higher proportion of their workforce, consistent with managerial incentives to disclose favorable information. However, disclosure is more prevalent in industries with a lower proportion of female employees, consistent with a poor gender diversity environment making a firm’s gender diversity appear relatively more favorable. Regarding the potential benefits of disclosure, disclosing firms enjoy more favorable media coverage of the firm’s diversity and attract a larger number of gender-lens ESG funds. Disclosing firms with a higher proportion of female employees enjoy greater benefits. Overall, our study broadens our understanding of the evolving corporate disclosure landscape by providing evidence on firms’ incentives to disclose workforce gender diversity. Data availability: All data used in this study are publicly available from sources identified in the manuscript. JEL Classifications: G10; G20; M41.

A Study on the Antecedent Grouping Pattern of ESG Decoupling in New Energy Vehicle Manufacturing Companies

This study explores the decoupling phenomenon of listed companies in the new energy vehicle manufacturing category in terms of ESG (environmental, social, and corporate governance) by using fuzzy set qualitative comparative analysis (fsQCA) and necessity condition analysis (NCA) methods, and identifies four different groupings. These groupings reveal the complexity and diversity of firms' ESG performance and disclosure, including high gearing and low environmental commitment, high management compensation and low social responsibility, high media attention and selective disclosure, and high market competition and inadequate governance. The results of the study show that financial pressure, management incentives, media attention and market competition all significantly affect firms' ESG behavior. Based on this, policy and management recommendations are proposed, such as strengthening the regulation of ESG disclosure, incorporating ESG performance assessment in executive incentives, and balancing short-term financial goals with long-term sustainable development. Although this study reveals the complexity of ESG decoupling in new energy automobile manufacturing firms, the limitations of data source, sample scope and methodology still exist. Future research should expand the sample scope, conduct dynamic analysis, and synthesize multiple methods to deepen the understanding of corporate ESG decoupling behavior and provide scientific guidance for management and policy making.

Blockchain adoption and corporate financial reporting quality

We study the impact of blockchain technology on corporate financial reporting quality based on the staggered implementation of blockchain-based e-invoice systems by provincial and municipal governments in China since 2018. Using a difference-in-differences approach with a sample of listed firms in China from 2016 to 2022, we find that the accrual quality and earnings informativeness improve post-adoption. This treatment effect is more pronounced for firms with more complex operations and those located in technologically advanced and market-oriented environments, but is similar across firms with varying earnings management incentives. Blockchain adoption is associated with fewer error-related accounting restatements, but not with non-error-related restatements or corporate tax avoidance. Furthermore, blockchain adoption is associated with increased stock liquidity, improved analyst forecast consensus, and lower cost of equity. Overall, our results suggest that the blockchain adoption improves corporate financial reporting quality by enhancing accounting function efficiency rather than deterring potential manipulations.

Inclusionary housing policy and practice in South African cities: planning as a spatial transformation tool

AbstractGlobally, housing forms an integral part of accessing the wide range opportunities that cities offer, however, inequality can be exacerbated when significant segments of the inhabitants are excluded from the real estate market or through inaction by the state. The need for affordable housing in cities with hyper-property markets is of global concern for public sector authorities that are pursuing goals of socially just and economically inclusive cities. In the global south, inclusionary housing policies and associated practices have emerged as important tools to increase access for those excluded from the opportunities available in towns and cities. In South Africa, the post-1994 democratic state has continued with the apartheid era practice of providing subsidised housing for the majority urban residents on the outskirts of towns and cities, thereby further entrenching poverty traps and racially based separate developments. Contrary to practice, the state’s well-documented policy position is to reverse the legacy of apartheid through spatial transformation so that cities and towns become economically more inclusive and socially just. It is argued that this requires prioritising the provision of affordable housing in urban centres of towns and cities that offer meaningful working, residing, shopping, recreational and other social opportunities. Although inclusionary housing policy has emerged internationally as an important mechanism to spatially transform urban areas, this forms only one component of a wider range of other possible public interventions. These framework mechanisms could include broader housing development policies, legislation and programmes as well as the urban development policies, spatial planning and land use management practices and incentives. Other incentives that can be used as leverage include the use of publicly owned property (land and buildings), capital infrastructure and development incentives. The public sector can offer both direct and indirect financial assistance and tax incentives to support an inclusionary housing policy. Critically, this should be contingent on the public sector understanding the feasibility, risk and benefits associated with housing projects pursued by private sector real estate developers.

Manufacturing and Fraud: Evidence from Price Competition and Lean Inventories

ABSTRACT We examine fraud from an industry competition perspective, oriented from inventory theory. We find that fraud occurs among manufacturers more than nonmanufacturers and that the association between price competition and fraud is significantly more pronounced in the manufacturing sector. Aggregating inventory and cash flow patterns to the industry level, we report that industry inventory imbalance rates, from either excessive stockpiling or inventory leanness, associate with increased future price competition, which subsequently associates with more fraud. However, for manufacturers, the industry-wide prevalence of either excess or leanness amplifies future price competition, which is observed as a U-shaped association that ultimately ties to more fraud. These effects are stronger when extreme leanness is the manufacturing industry’s standard. We also provide evidence that the association between price competition and fraud is comparable to managerial incentives’ association with fraud. Together, our findings contribute to the literature on price competition, inventory management, and corporate misconduct. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M11; M21; M41; L60.

Managerial Myopia and Corporate Sustainable Development Capabilities

Currently, the economy of China is demonstrating positive momentum. However, it also faces pressures stemming from structural adjustments and changes in the external environment. Ensuring sustainable development at the corporate level is crucial for maintaining overall economic stability and sustained growth within the nation. This paper utilizes A-share listed companies from 2007 to 2022 as a research sample and employs methods such as text analysis to measure managerial myopia, thereby investigating the relationship between managerial myopia and corporate sustainable development capabilities. The study finds a significant negative correlation between managerial myopia and corporate sustainable development capabilities, with the level of financialization of the corporate playing a mediating role: managerial myopia can lead to an increase in the level of financialization of the corporate, thereby weakening corporate sustainable development capabilities. Furthermore, internal controls and managerial incentive pay weaken the negative relationship between managerial myopia and corporate sustainable development capabilities. This paper also analyzes the degree to which managerial myopia weakens the sustainable development capabilities of enterprises with different property rights and different institutional investor shareholding ratios. It is found the detrimental impact of managerial myopia on the sustainable development capabilities of state-owned enterprises and corporate with lower institutional investor shareholding is more pronounced.

Corporate Governance, Meritocracy and Careers

Abstract Firms may pursue non-meritocratic promotion policies at the cost of lower profitability, if they yield private benefits of control. Corporate governance standards that limit these private benefits favor meritocratic promotions, and thereby encourage workers' skill acquisition. Managerial incentive pay has ambiguous effects on workers' skill acquisition: it fosters the supply of skilled labor, while reducing firms' willingness to promote skilled workers to managerial positions. Social welfare increases with the share of meritocratic firms, but not necessarily with governance standards: small reforms generate losers and gainers, and may on balance lower welfare, while drastic enough reforms can generate Pareto improvements.

The impact of institutional and managerial ownership on the pay-performance relationship: Evidence from JSE-listed firms

AbstractThis study explores how institutional and managerial ownership influence the connection between executive directors’ pay and firm performance in South Africa. Employing panel linear regression models and Johnson-Neyman analysis, complex insights are revealed. This study revealed that institutional ownership acts as a double-edged sword, positively moderating the link between long-term and total incentive remuneration and Return on Assets (ROA), while negatively influencing the relationship with market-based metrics like Tobin’s Q. This suggests that institutional shareholders play a dual role in enhancing long-term alignment and tempering short-term performance pressures. Managerial ownership also demonstrates mixed impacts, positively moderating the relationship between both short-term and total incentive remuneration, and ROA, but negatively moderating the link between long-term incentive remuneration and Total Shareholder Return (TSR). These findings underscore the delicate balance between managerial incentives, shareholder interests, and long-term value creation. While higher managerial ownership aligns with short-term shareholder goals, it may also lead to managerial entrenchment and short-termism in certain contexts. This study contributes to literature on corporate governance and executive remuneration in an emerging market setting.. By revealing the nuanced effects of institutional and managerial ownership on the pay-performance relationship, the paper provides valuable insights for policymakers, investors and corporate leaders aiming to improve governance practices and foster sustainable value creation. Our study offers essential implications for corporate governance practices and sets the stage for further inquiry into the intricate relationship between ownership structure, executive compensation, and firm performance.