Insider trading and family firms

We find that CEOs of S&P 1500 family firms, founding CEOs in particular, are more active stock traders than are the CEOs of non-family firms. Importantly, the stock trades made by founding CEOs (and, to a lesser extent, those made by founders’ descendants) are more profitable than those made by the CEOs of non-family firms. This finding is more pronounced for family firms that are difficult to value or that have poor corporate governance. Founding CEOs’ excess stock trading returns arise both from trades made before earnings surprises and those made outside earnings announcement periods. Finally, founding CEOs’ trades forecast their company’s future stock returns better than those made by the CEOs of non-family firms.postprintThe 37th Annual Meeting of the European Finance Association (EFA), Frankfurt, Germany, 25-28 August 2010

The effects of firm-initiated clawback provisions on bank loan contracting

Although firm-initiated clawbacks reduce accounting manipulation, they also induce managers to engage in suboptimal activities (e.g., reduce research and development (R&D) expenses) to achieve earnings targets. To assess the effectiveness of clawback provisions, we examine their impact from debtholders' point of view. We find that banks use more financial covenants and performance pricing provisions in the loan contracts and decrease interest rates after firms initiate clawbacks. Moreover, we also find that loan maturity increases and loan collateral decreases subsequent to clawback adoption. Taken together, our findings indicate that firm-initiated clawback provisions enhance financial reporting quality, thereby reducing the information uncertainty that financing providers face

Do Clawback Provisions influence Capital Investments?

We present evidence that clawback adoptions influence capital investment mix via managerial compensation incentives. Specifically, we find for a propensity-matched sample of 931 voluntary clawback adopters that capital investments shift away from R&D and toward capital expenditures, and toward acquisitions for firms with enabling liquidity, consistent with clawback effects on earnings-linked compensation. Corroborating evidence confirms these effects to be positively related to performance-based pay, growth opportunities, and invariant to risk-toleration incentives, with firms adopting clawbacks also exhibiting capital over-investment. This evidence is timely given a pending SEC rule that would mandate clawbacks for all firms listing on US exchanges

Substitution between Real and Accruals-Based Earnings Management after Voluntary Adoption of Compensation Clawback Provisions

To deter financial misstatements, many companies have recently adopted compensation recovery policies—commonly known as ‘‘clawbacks’’—that authorize the board to recoup compensation paid to executives based on misstated financial reports. Clawbacks have been shown to reduce financial misstatements and increase investors’ confidence on earnings information. We show that the benefits come with an unintended consequence of certain firms substituting for accruals management with real transactions management (e.g., reduce research and development [R&D] expenditures), especially firms with strong incentives to achieve short-term earnings targets, such as firms with high growth or high transient institutional ownership. As such, the total amount of earnings management does not decrease subsequent to clawback adoption. We further show that although real transactions management temporarily boosts those clawback adopters’ short-term profitability and stock performance, this trend reverses after three years. In summary, clawbacks may have unexpected effects for a subset of firms whose managers are under greater pressure to meet earnings goals

Reexamining the relationship between audit and nonaudit fees: dealing with weak instruments in two-stage least squares estimation

The authors introduce some new econometric tests and techniques for identifying and overcoming the problem of weak instruments in the context of joint provision of audit and nonaudit fees. The authors use this context because identifying appropriate instruments is difficult due to the lack of theoretical guidance as well as due to the difficulty in intuitively identifying instruments that satisfy the econometric requirements. The authors introduce a battery of empirical tests based on recent developments in econometrics to test for the appropriateness of the instruments. The authors then illustrate two approaches of using instruments from existing data: the size industry average portfolio approach and the synthetic-instrument approach. Although the approach using synthetic instruments sidesteps issues of identifying proxies with desirable properties, it requires some stringent assumptions that cannot be directly tested. However, as a methodological alternative, this approach can be used for robustness tests. The authors find that when the instruments are not weak, audit and nonaudit fees are positively associated. This relationship holds for audit and tax-related nonaudit fees as well. Overall, the evidence suggests the existence of economies of scope benefits from the joint supply of audit and nonaudit services. Methodologically, the authors illustrate the importance of testing the appropriateness of the instruments utilized when accounting for endogeneity. © The Author(s) 2012.link_to_subscribed_fulltex

Modelling surface temperature of granite seawalls in Singapore

10.1016/j.csite.2019.100395Case Studies in Thermal Engineering13100395-10039

The time lines of viral shedding and clinical course in influenza infections

Poster no. 2

Variability of viral shedding dynamics among cases of influenza A virus infections

Conference Theme: Occupational Health for All: From Prevention to RehabilitationAbstract and poster presentation - Poster