TYPES OF FIRM-INITIATED CLAWBACK PROVISIONS AND SHORT- AND LONG-TERM COST OF DEBT

TYPES OF FIRM-INITIATED CLAWBACK PROVISIONS AND SHORT- AND LONG-TERM COST OF DEBT

We investigate firm-initiated clawback provisions in compensation contracts by providing empirical evidence on the impact of the different types of clawback adoptions on firms' debt costs. Our focus on clawback provisions informs the current discussion on clawback adoption required by the Dodd-...

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Veröffentlicht in:The journal of theoretical accounting research 2016-10, Vol.12 (1), p.54-79
Hauptverfasser: Zhang, Jean, Dorminey, Jack, Wier, Benson
Format: Artikel
Sprache:eng
Schlagworte:
Accounting
American Recovery & Reinvestment Act 2009-US
Borrowing
Clawback
Costs
Executive compensation
Financial reporting
Financial restatements
Fraud
Noncompliance
Provisions
Securities markets
Wall Street Reform & Consumer Protection Act 2010-US
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Zusammenfassung:We investigate firm-initiated clawback provisions in compensation contracts by providing empirical evidence on the impact of the different types of clawback adoptions on firms' debt costs. Our focus on clawback provisions informs the current discussion on clawback adoption required by the Dodd-Frank Act. Using a sample of clawback firms between 2005 and 2012, we find a significant decline in debt costs following the adoption of either fraud- or performancebased clawback provisions. In addition, we also find a significant decline in debt costs following the adoption over short and long horizons. Overall, our empirical evidence suggests benefits for clawback firms in the debt market.
ISSN:1556-5106