How Accounting Employees’ Incentives Affect Financial Reporting Quality

An extensive body of literature that spans accounting, corporate finance, management, and other adjacent disciplines examines the relationship between senior executives’ contractual incentives (e.g., bonus plans, stock and option holdings) and various properties of their firms’ financial reporting and disclosures. The collective evidence that emerges from this vast literature is not only surprisingly mixed, but also largely neglects consideration of the contractual incentives of employees lower in the organizational hierarchy. This is a particularly conspicuous oversight since many of these subordinates (e.g., financial accountants, cost accountants, internal auditors, and other accounting and finance employees) have more direct access to, and … Read more

How Taxes on Managers Affect Corporate Risk-Taking

Fiscal policy—and taxation in particular—is one of the most important tools that policymakers can use to influence the economy. While the effect of corporate taxes on managers’ corporate investment decisions has been extensively studied, little is known about the effect of managers’ personal taxes on their corporate investment decisions. In a recent study, we attempt to fill this gap by examining the relation between personal income taxes levied directly on senior managers, hereafter “managerial taxes,” and their corporate risk-taking. Given their unique position as primary decision-makers at the firm, understanding whether and how taxes on senior managers affect corporate decisions … Read more