683
Views
2
CrossRef citations to date
0
Altmetric
Article

The use of non-financial performance measures in CEO compensation contracts and stock price crash risk

ORCID Icon, &
Pages 531-552 | Received 14 Aug 2019, Accepted 02 Jun 2020, Published online: 01 Jul 2020

References

  • Banker, R., and S. Datar. 1989. “Sensitivity, Precision, and Linear Aggregation of Signals for Performance Evaluation.” Journal of Accounting Research 27 (1): 21–39. doi:10.2307/2491205.
  • Banker, R., and R. Mashruwala. 2007. “The Moderating Role of Competition in the Relationship between Nonfinancial Measures and Future Financial Performance.” Contemporary Accounting Research 24 (3): 763–793. doi:10.1506/car.24.3.4.
  • Banker, R., G. Potter, and D. Srinivasan. 2000. “An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures.” The Accounting Review 75 (1): 65–92. doi:10.2308/accr.2000.75.1.65.
  • Barua, A., C. H. Kriebel, and T. Mukhopadhyay. 1995. “Information Technologies and Business Value: An Analytic and Empirical Investigation.” Information Systems Research 6 (1): 3–24. doi:10.1287/isre.6.1.3.
  • Benmelech, E., E. Kandel, and P. Veronesi. 2010. “Stock-Based Compensation and CEO (Dis) Incentives.” Quarterly Journal of Economics 125 (4): 1769–1820. doi:10.1162/qjec.2010.125.4.1769.
  • Bento, A., and L. White. 2010. “An Exploratory Study of Strategic Performance Measurement Systems.” Advances in Management Accounting 18: 1–26.
  • Bergstresser, D., and T. Philippon. 2006. “CEO Incentives and Earnings Management.” Journal of Financial Economics 80 (3): 511–529. doi:10.1016/j.jfineco.2004.10.011.
  • Bleck, A., and X. Liu. 2007. “Market Transparency and the Accounting Regime.” Journal of Accounting Research 45 (2): 229–256. doi:10.1111/j.1475-679X.2007.00231.x.
  • Chen, C., J.-B. Kim, and L. Yao. 2017. “Earnings Smoothing: Does It Exacerbate or Constrain Stock Price Crash Risk?” Journal of Corporate Finance 42: 36–54. doi:10.1016/j.jcorpfin.2016.11.004.
  • Chen, C., E. Matsumura, J. Shin, and S. Wu. 2015. “The Effect of Competition Intensity and Competition Type on the Use of Customer Satisfaction Measures in Executive Annual Bonus Contracts.” The Accounting Review 90 (1): 229–263. doi:10.2308/accr-50870.
  • Chen, J., H. Hong, and J. Stein. 2001. “Forecasting Crashes: Trading Volume, past Returns, and Conditional Skewness in Stock Prices.” Journal of Financial Economics 61 (3): 345–381. doi:10.1016/S0304-405X(01)00066-6.
  • Cheng, Q., and T. Warfield. 2005. “Equity Incentives and Earnings Management.” The Accounting Review 80 (2): 441–476. doi:10.2308/accr.2005.80.2.441.
  • Core, J., and W. Guay. 2002. “Estimating the Value of Employee Stock Option Portfolios and Their Sensitivities to Price and Volatility.” Journal of Accounting Research 40 (3): 613–630. doi:10.1111/1475-679X.00064.
  • Davila, A., and M. Venkatachalam. 2004. “The Relevance of Non-Financial Performance Measures for CEO Compensation: Evidence from the Airline Industry.” Review of Accounting Studies 9 (4): 443–464. doi:10.1007/s11142-004-7792-8.
  • DeAngelo, H., L. DeAngelo, and D. J. Skinner. 1994. “Accounting Choice in Troubled Companies.” Journal of Accounting and Economics 17 (1–2): 113–143. doi:10.1016/0165-4101(94)90007-8.
  • Dechow, P., W. Ge, C. Larson, and R. Sloan. 2011. “Predicting Material Accounting Misstatements.” Contemporary Accounting Research 28 (1): 17–82. doi:10.1111/j.1911-3846.2010.01041.x.
  • Dechow, P., R. Sloan, and A. Sweeney. 1995. “Detecting Earnings Management.” The Accounting Review 70 (2): 193–225.
  • DeFond, M., M. Hung, S. Li, and Y. Li. 2015. “Does Mandatory IFRS Adoption Affect Crash Risk?” The Accounting Review 90 (1): 265–299. doi:10.2308/accr-50859.
  • Dikolli, S., W. Kinney Jr, and K. Sedatole. 2007. “Measuring Customer Relationship Value: The Role of Switching Cost.” Contemporary Accounting Research 24 (1): 93–132. doi:10.1506/N658-3452-4X2L-0847.
  • Eccles, R., and S. Mavrinac. 1995. “Improving the Corporate Disclosure Process.” Sloan Management Review 36 (4): 11–25.
  • Feltham, G., and J. Xie. 1994. “Performance Measure Congruity and Diversity in Multi-Task Principal/Agent Relations.” The Accounting Review 69 (3): 429–453.
  • Ghosh, A., and Y. G. Lee. 2013. “Financial Reporting Quality, Structural Problems and the Informativeness of Mandated Disclosures on Internal Controls.” Journal of Business Finance & Accounting 40 (3–4): 318–349. doi:10.1111/jbfa.12015.
  • Hauser, J., D. Simester, and B. Wernerfelt. 1994. “Customer Satisfaction Incentives.” Marketing Science 13 (4): 327–350. doi:10.1287/mksc.13.4.327.
  • Hemmer, T. 1996. “On the Design and Choice of “Modern” Management Accounting Measures.” Journal of Management Accounting Research 8: 87–116.
  • Hermanson, D. R., and Z. Ye. 2009. “Why Do Some Accelerated Filers with SOX Section 404 Material Weaknesses Provide Early Warning under Section 302?” Auditing: A Journal of Practice & Theory 28 (2): 247–271. doi:10.2308/aud.2009.28.2.247.
  • Ho, S. K., and R. B. McKay. 2002. “Balanced Scorecard: Two Perspectives.” The CPA Journal 72 (3): 20–25.
  • Hong, H. A., J.-B. Kim, and M. Welker. 2017. “Divergence of Cash Flow and Voting Rights, Opacity, and Stock Price Crash Risk: International Evidence.” Journal of Accounting Research 55 (5): 1167–1212. doi:10.1111/1475-679X.12185.
  • Hsu, A. W. H., and G. S. H. Wu. 2019. “The Fair Value of Investment Property and Stock Price Crash Risk.” Asia-Pacific Journal of Accounting & Economics 26 (1–2): 38–63. doi:10.1080/16081625.2019.1545895.
  • Huang, J., R. Balakrishnan, and F. Pan. 2016. “On the Association between Current Period Budget Target Achievability and the Properties of Nonfinancial Measures.” Journal of Management Accounting Research 29 (2): 47–62. doi:10.2308/jmar-51536.
  • Hughes, K. E. 2000. “The Value Relevance of Nonfinancial Measures of Air Pollution in the Electric Utility Industry.” The Accounting Review 75 (2): 209–228. doi:10.2308/accr.2000.75.2.209.
  • Hutton, A., A. Marcus, and H. Tehranian. 2009. “Opaque Financial Reports, R2, and Crash Risk.” Journal of Financial Economics 94 (1): 67–86. doi:10.1016/j.jfineco.2008.10.003.
  • Ibrahim, S., and C. Lloyd. 2011. “The Association between Non-Financial Performance Measures in Executive Compensation Contracts and Earnings Management.” Journal of Accounting and Public Policy 30 (3): 256–274. doi:10.1016/j.jaccpubpol.2010.10.003.
  • Ittner, C., and D. Larcker. 1998a. “Are Nonfinancial Measures Leading Indicators of Financial Performance? An Analysis of Customer Satisfaction.” Journal of Accounting Research 36 (3): 1–35. doi:10.2307/2491304.
  • Ittner, C., and D. Larcker. 1998b. “Innovations in Performance Measurement: Trends and Research Implications.” Journal of Management Accounting Research 10: 205–238.
  • Ittner, C., and D. Larcker. 2003. “Coming up Short on Nonfinancial Performance Measurement.” Harvard Business Review 81 (11): 88–95.
  • Ittner, C., D. Larcker, and M. Meyer. 2003. “Subjectivity and the Weighting of Performance Measures: Evidence from a Balanced Scorecard.” The Accounting Review 78 (3): 725–758. doi:10.2308/accr.2003.78.3.725.
  • Ittner, C., D. Larcker, and M. Rajan. 1997. “The Choice of Performance Measures in Annual Bonus Contracts.” The Accounting Review 72 (2): 231–255.
  • Jaggi, B., and P. Lee. 2002. “Earnings Management Response to Debt Covenant Violations and Debt Restructuring.” Journal of Accounting, Auditing and Finance 17 (4): 295–324. doi:10.1177/0148558X0201700402.
  • Jin, L., and S. Myers. 2006. “R2 around the World: New Theory and New Tests.” Journal of Financial Economics 79 (2): 257–292. doi:10.1016/j.jfineco.2004.11.003.
  • Jones, T. O., and W. E. Sasser Jr. 1995. “Why Satisfied Customers Defect.” Harvard Business Review: 88–99. (November-December).
  • Kaplan, R., and D. P. Norton. 1996. “Using the Balanced Scorecard as a Strategic Management System.” Harvard Business Review 74 (1): 75–85.
  • Kaplan, R. S., and D. P. Norton. 1992. “The Balanced Scorecard: Measures That Drive Performance.” Harvard Business Review 70 (1): 71–79.
  • Kelly, K. O. 2007. “Feedback and Incentives on Nonfinancial Value Drivers: Effects on Managerial Decision Making.” Contemporary Accounting Research 24 (2): 523–556. doi:10.1506/Q5X8-5912-W613-0UTL.
  • Khurana, I. K., R. Pereira, and E. Zhang. 2018. “Is Real Earnings Smoothing Harmful? Evidence from Firm-Specific Stock Price Crash Risk.” Contemporary Accounting Research 35 (1): 558–587. doi:10.1111/1911-3846.12353.
  • Kim, J.-B., L. Li, L. Lu, and Y. Yu. 2016. “Financial Statement Comparability and Expected Crash Risk.” Journal of Accounting and Economics 61 (2–3): 294–312. doi:10.1016/j.jacceco.2015.12.003.
  • Kim, J.-B., Y. Li, and L. Zhang. 2011a. “CFOs versus CEOs: Equity Incentives and Crashes.” Journal of Financial Economics 101 (3): 713–730. doi:10.1016/j.jfineco.2011.03.013.
  • Kim, J.-B., Y. Li, and L. Zhang. 2011b. “Corporate Tax Avoidance and Stock Price Crash Risk: Firm-Level Analysis.” Journal of Financial Economics 100 (3): 639–662. doi:10.1016/j.jfineco.2010.07.007.
  • Kim, J.-B., and L. Zhang. 2014. “Financial Reporting Opacity and Expected Crash Risk: Evidence from Implied Volatility Smirks.” Contemporary Accounting Research 31 (3): 851–875. doi:10.1111/1911-3846.12048.
  • Kim, Y., H. Li, and S. Li. 2014. “Corporate Social Responsibility and Stock Price Crash Risk.” Journal of Banking & Finance 43: 1–13. doi:10.1016/j.jbankfin.2014.02.013.
  • Kothari, S. P., S. Shu, and P. D. Wysocki. 2009. “Do Managers Withhold Bad News?” Journal of Accounting Research 47 (1): 241–276. doi:10.1111/j.1475-679X.2008.00318.x.
  • Matsumura, E. M., R. Prakash, and S. C. Vera-Muñoz. 2013. “Firm-Value Effects of Carbon Emissions and Carbon Disclosures.” The Accounting Review 89 (2): 695–724. doi:10.2308/accr-50629.
  • Nagar, V., and M. Rajan. 2001. “The Revenue Implications of Financial and Operational Measures of Product Quality.” The Accounting Review 76 (4): 495–513. doi:10.2308/accr.2001.76.4.495.
  • National Academy of Engineering. 1992. Time Horizons and Technology Investments. Washington, D.C.: National Academy Press.
  • Nilsson, F., and A.-K. Stockenstrand. 2015. Financial Accounting and Management Control: The Tensions and Conflicts between Uniformity and Uniqueness. Switzerland: Springer International Publishing.
  • Petersen, M. 2009. “Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches.” Review of Financial Studies 22 (2): 435–480. doi:10.1093/rfs/hhn053.
  • Rangan, S. 1998. “Earnings Management and the Performance of Seasoned Equity Offerings.” Journal of Financial Economics 50 (1): 101–122. doi:10.1016/S0304-405X(98)00033-6.
  • Rees, W., and C. Sutcliffe. 1994. “Quantitative Non-Financial Information and Income Measures: The Case of Long-term Contracts.” Journal of Business Finance and Accounting 21 (April): 331–347. doi:10.1111/j.1468-5957.1994.tb00323.x.
  • Richardson, S. A., R. G. Sloan, M. T. Soliman, and I. Tuna. 2006. “The Implications of Accounting Distortions and Growth for Accruals and Profitability.” The Accounting Review 81 (3): 713–743. doi:10.2308/accr.2006.81.3.713.
  • Rogers, J. L., and P. C. Stocken. 2005. “Credibility of Management Forecasts.” The Accounting Review 80 (4): 1233–1260. doi:10.2308/accr.2005.80.4.1233.
  • Said, A., H. HassabElnaby, and B. Wier. 2003. “An Empirical Investigation of the Performance Consequences of Nonfinancial Measures.” Journal of Management Accounting Research 15 (1): 193–223. doi:10.2308/jmar.2003.15.1.193.
  • Shivakumar, L. 2000. “Do Firms Mislead Investors by Overstating Earnings before Seasoned Equity Offerings?” Journal of Accounting and Economics 29 (3): 339–371. doi:10.1016/S0165-4101(00)00026-4.
  • Simerly, M. C. 2015. “CEO Characteristics and the Choice of Using Non-Financial Performance Measures in Compensation Contracts.” PhD Diss., Virginia Commonwealth University.
  • Smith, M. J. 2002. “Gaming Nonfinancial Performance Measures.” Journal of Management Accounting Research 14 (1): 119–133. doi:10.2308/jmar.2002.14.1.119.
  • Sunder, S. 2010. “Riding the Accounting Train: From Crisis to Crisis in Eighty Years.” Presentation at the Conference on Financial Reporting, Auditing and Governance, Lehigh University, Bethlehem, PA.
  • Zalata, A. M., C. Ntim, A. Aboud, and E. Gyapong. 2018. “Female CEOs and Core Earnings Quality: New Evidence on the Ethics versus Risk-aversion Puzzle.” Journal of Business Ethics 160 (2): 515–534. doi:10.1007/s10551-018-3918-y.
  • Zhong, Y., W. Li, and Y. Li. 2019. “Discretionary Income Smoothing and Crash Risk: Evidence from China.” Asia-Pacific Journal of Accounting & Economics Advance online publication. 1–23. doi:10.1080/16081625.2019.1600413.
  • Zhu, W. 2016. “Accruals and Price Crashes.” Review of Accounting Studies 21 (2): 349–399. doi:10.1007/s11142-016-9355-1.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.