Are CEOs and CFOs Rewarded for Disclosure Quality?

July 14, 2013 Leave a comment

Are CEOs and CFOs Rewarded for Disclosure Quality?

Kai Wai Hui Hong Kong University of Science & Technology – Department of Accounting

Steven R. Matsunaga University of Oregon

June 1, 2013

Abstract: 
In this study, we provide insight into the economic determinants and consequences of disclosure quality by examining the extent to which boards consider disclosure quality to be an important responsibility of the CEO and CFO. Specifically, we examine whether CEO and CFO pay is related to the firm’s disclosure quality, as measured using the index from Anderson, Duru and Reeb (2009) and management forecast accuracy. We find changes in cash compensation for both the CEO and CFO to be positively associated with changes in each measure of disclosure quality. We also investigate factors that influence the extent to which boards reward the managers for disclosure quality. We find that the relation is stronger for high growth firms and firms that have stronger governance structures. Overall, our findings provide empirical evidence that boards’ view disclosure quality to be an important determinant of firm value and provide managers financial incentives to provide high quality disclosures.

Filed under Research

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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