Managerial Risk-Taking Incentives and Non-GAAP Earnings Disclosures
Journal of Contemporary Accounting and Economics, Volume 9, Issue 1, June 2013, Pages 100–121
Posted: 26 Feb 2012 Last revised: 14 Jan 2014
Date Written: March 26, 2013
We investigate the association between risk-taking incentives provided by stock-based compensation arrangements and non-GAAP financial disclosures. Controlling for compensation to stock price sensitivity, we find that managers with higher compensation to stock volatility sensitivity (vega) are more likely to be associated with voluntary non-GAAP earnings information disclosures. In addition, higher-vega managers are found to be associated with more frequent and less opportunistic non-GAAP earnings information disclosures. Robust to alternative specifications and estimations, our findings suggest that compensation arrangements can encourage managers to make more, higher-quality voluntary non-GAAP disclosures.
Keywords: Executive Compensation, Risk-Taking, Managerial Incentives, Disclosure Policy, Non-GAAP Earnings
JEL Classification: G30, J33, M4, M52
Suggested Citation: Suggested Citation