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

See all articles by Naresh Bansal

Naresh Bansal

Saint Louis University - Department of Finance

Ananth Seetharaman

Saint Louis University - Department of Accounting

Xu (Frank) Wang

Saint Louis University - Chaifetz School of Business

Date Written: March 26, 2013

Abstract

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

Bansal, Naresh and Seetharaman, Ananth and Wang, Xu (Frank), Managerial Risk-Taking Incentives and Non-GAAP Earnings Disclosures (March 26, 2013). Journal of Contemporary Accounting and Economics, Volume 9, Issue 1, June 2013, Pages 100–121, Available at SSRN: https://ssrn.com/abstract=2011120 or http://dx.doi.org/10.2139/ssrn.2011120

Naresh Bansal

Saint Louis University - Department of Finance ( email )

Richard A. Chaifetz School of Business
St. Louis, MO 63108
United States
314-977-7204 (Phone)

Ananth Seetharaman

Saint Louis University - Department of Accounting ( email )

3674 Lindell Blvd.
St. Louis, MO 63108
United States
314-977-2473 (Phone)
314-977-1473 (Fax)

Xu (Frank) Wang (Contact Author)

Saint Louis University - Chaifetz School of Business ( email )

3674 Lindell Blvd
St. Louis, MO 63108-3397
United States

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