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The Effect of Pay Disparities within Top Management on Conservative Reporting

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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The Effect of Pay Disparities within Top Management on Conservative Reporting. / Gad, Mahmoud; Nguyen, Trang ; Scapin, Mariano.
In: Accounting and Business Research, Vol. 53, No. 4, 07.06.2023, p. 478-504.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Gad, M, Nguyen, T & Scapin, M 2023, 'The Effect of Pay Disparities within Top Management on Conservative Reporting', Accounting and Business Research, vol. 53, no. 4, pp. 478-504. https://doi.org/10.1080/00014788.2022.2056119

APA

Gad, M., Nguyen, T., & Scapin, M. (2023). The Effect of Pay Disparities within Top Management on Conservative Reporting. Accounting and Business Research, 53(4), 478-504. https://doi.org/10.1080/00014788.2022.2056119

Vancouver

Gad M, Nguyen T, Scapin M. The Effect of Pay Disparities within Top Management on Conservative Reporting. Accounting and Business Research. 2023 Jun 7;53(4):478-504. Epub 2022 May 22. doi: 10.1080/00014788.2022.2056119

Author

Gad, Mahmoud ; Nguyen, Trang ; Scapin, Mariano. / The Effect of Pay Disparities within Top Management on Conservative Reporting. In: Accounting and Business Research. 2023 ; Vol. 53, No. 4. pp. 478-504.

Bibtex

@article{abdc2751ff2a4f7fa1b027ca9edef3a9,
title = "The Effect of Pay Disparities within Top Management on Conservative Reporting",
abstract = "We study the effect of the pay gap between the chief executive officer (CEO) and the next layer of executives in the top management team (TMT)—a proxy for promotion-based tournament incentives—on conditional conservatism in financial reporting. We find that higher levels of tournament incentives are associated with less conservative financial reports. Our results hold in an instrumental variable (IV) analysis and regressions using alternative measures of both pay gap and accounting conservatism. Furthermore, we find that senior executives{\textquoteright} engagement in tournaments for promotion is affected by their perceived probability of success. Specifically, the negative relationship between the pay gap and conservatism is stronger (weaker) when the CEO is more (less) likely to be replaced. Overall, our results indicate that pay disparities within the TMT play an important role in financial reporting.",
keywords = "conservatism, financial reporting, pay gap, tournament incentives, promotion, senior management, executive compensation, corporate governance",
author = "Mahmoud Gad and Trang Nguyen and Mariano Scapin",
year = "2023",
month = jun,
day = "7",
doi = "10.1080/00014788.2022.2056119",
language = "English",
volume = "53",
pages = "478--504",
journal = "Accounting and Business Research",
issn = "0001-4788",
publisher = "Routledge",
number = "4",

}

RIS

TY - JOUR

T1 - The Effect of Pay Disparities within Top Management on Conservative Reporting

AU - Gad, Mahmoud

AU - Nguyen, Trang

AU - Scapin, Mariano

PY - 2023/6/7

Y1 - 2023/6/7

N2 - We study the effect of the pay gap between the chief executive officer (CEO) and the next layer of executives in the top management team (TMT)—a proxy for promotion-based tournament incentives—on conditional conservatism in financial reporting. We find that higher levels of tournament incentives are associated with less conservative financial reports. Our results hold in an instrumental variable (IV) analysis and regressions using alternative measures of both pay gap and accounting conservatism. Furthermore, we find that senior executives’ engagement in tournaments for promotion is affected by their perceived probability of success. Specifically, the negative relationship between the pay gap and conservatism is stronger (weaker) when the CEO is more (less) likely to be replaced. Overall, our results indicate that pay disparities within the TMT play an important role in financial reporting.

AB - We study the effect of the pay gap between the chief executive officer (CEO) and the next layer of executives in the top management team (TMT)—a proxy for promotion-based tournament incentives—on conditional conservatism in financial reporting. We find that higher levels of tournament incentives are associated with less conservative financial reports. Our results hold in an instrumental variable (IV) analysis and regressions using alternative measures of both pay gap and accounting conservatism. Furthermore, we find that senior executives’ engagement in tournaments for promotion is affected by their perceived probability of success. Specifically, the negative relationship between the pay gap and conservatism is stronger (weaker) when the CEO is more (less) likely to be replaced. Overall, our results indicate that pay disparities within the TMT play an important role in financial reporting.

KW - conservatism

KW - financial reporting

KW - pay gap

KW - tournament incentives

KW - promotion

KW - senior management

KW - executive compensation

KW - corporate governance

U2 - 10.1080/00014788.2022.2056119

DO - 10.1080/00014788.2022.2056119

M3 - Journal article

VL - 53

SP - 478

EP - 504

JO - Accounting and Business Research

JF - Accounting and Business Research

SN - 0001-4788

IS - 4

ER -