This dissertation contains three studies relating to executive compensation clawback policies. In the first study (Chapter 3), I investigate the relation between voluntary clawback adoption and shareholder satisfaction. I find that various measures of shareholder dissatisfaction are associated with an increased likelihood of initial clawback adoption and, for firms that already have one in place, an increased likelihood of clawback enhancement. When investigating the impact of clawbacks on shareholder dissatisfaction, measured with say-on-pay (SOP) voting dissent, I find voting dissent is reduced when clawbacks include a reporting-focused trigger. I also find partial evidence that clawbacks reduce SOP voting dissent associated with abnormal CEO compensation, suggesting that shareholders assign greater value to the clawback policy as the value of abnormal compensation increases. In Chapter 4, I examine the relation between earnings quality and variations in the features of clawback policies: the types of trigger events, the executives covered, the amount of compensation subject to clawback, and board discretion in clawback enforcement. The results suggest that earnings quality increases when clawbacks contain reporting-focused triggers and that more automatic clawbacks improve perceptions of reporting quality. In Chapter 5, I examine the relation between mandatory clawbacks, which are required for firms participating in the Troubled Asset Relief Program (TARP), and both observed earnings quality and perceptions of earnings quality. The findings suggest that mandatory clawbacks are associated with improvements in auditor’s perceptions of reporting quality. However, they are also associated with a greater likelihood of financial restatement, indicating that government mandated clawbacks may reduce the quality of earnings. The results of these studies may be of interest to regulators as they work towards the final rules governing mandatory clawbacks under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. / Business Administration/Accounting

In this study, we use a sample of 228 financial firms over the period of 2007-2012 to examine the impact of voluntary adoption of clawback provisions on these firms’ risk-taking behavior. We find that financial firms exhibit a significant reduction in risk after adopting clawback provisions. The financial firms also exhibit a significant decrease in the volatility of ROE, total return risk and idiosyncratic risk. The reduction in risk is mainly driven by the improvement in the volatility of return on assets and subsample of banks and brokers. In addition, we find that financial firms are less likely to adopt clawback provisions with higher management and director ownership, more insiders on the board, and whose CEO is not the chairman of the board. / February 2017

本研究旨在探討不同的市場參與者是否會視公司自願性採用Clawback條款與否，而給予不同的回應。以2007至2011年間納入Russel 3000指數之公司(排除金融服務與保險業)為樣本，本研究發現，與未採用Clawback條款之公司相比，自願性採用Clawback條款之公司，其權益資金成本較低，且信用評等較佳，顯示投資人及信用評等機構皆認為Clawback條款有助於提升公司之財務報導品質，進而降低其所承受之資訊風險。本研究進一步以F-score (Dechow et al. 2011)來衡量公司的事前舞弊風險，並將樣本區分為高舞弊風險組與低舞弊風險組。本研究發現，Clawback條款僅在低舞弊風險組與權益資金成本呈顯著負相關，顯示財務品質較佳之公司確實會透過自願性採用Clawback條款來向資本市場彰顯其信心，而投資人亦會以較低之要求報酬做出回應。然而，本研究亦發現，Clawback條款僅在高舞弊風險組與信用評等呈顯著正相關，這意味著信用評等機構能夠區別Clawback條款對於高舞弊風險公司及低舞弊風險公司的效益，並針對尋求實質改善的公司做出正面回應。最後，本研究使用機構投資人持股比例，將樣本區分為高外部監督與低外部監督(亦即低代理問題與高代理問題)兩組。迴歸結果顯示，僅有在公司所受到的外部監督程度較低時，Clawback條款方會與權益資金成本及信用評等呈顯著相關。 / This study examines whether different market participants react differently to voluntary adopters and non-adopters of clawback provisions. Based on the sample of non-financial firms included in the Russel 3000 index from year 2007 to 2011, the empirical results show that, comparing to non-adopters, firms who voluntarily adopt the clawback provisons have lower cost of equity capital and higher credit rating, suggesting that both investors and credit rating agency regard clawback provisions as a means to reduce information risk and, therefore, enhance firms’ financial reporting quality. This study further uses the F-score (Dechow et al. 2011) to separate the sample into high versus low risk of occuring fraudulent financial reporting groups. The regression results from both groups indicate that the adoption of clawback provisions is negatively related to cost of equity capital only when firms have lower fraud risk. This finding implies that firms with good financial reporting quality tend to adopt clawback provisions to signal their confidence on financial reporting, and investors respond by requiring lower returns. In contrast, the results report that the adoption of clawback provisions is positively related to credit rating only when firms are more likely to incur fraudulent financial reporting, implying that credit rating agency appears to consider the effect of clawback provisions and responds to firms who seek real improvement in their financial reporting quality. Finally, this study adopts institutional investors’ ownership to seperate the sample into high versus low external monitoring (i.e., low versus high agency problem) groups. The regression results from both groups show that the effects of clawback provisions on cost of equity capital and credit rating remain only for firms that are subjected to low external monitoring.

This study first examines whether equity-based compensation (i.e., stocks and options) is associated with audit committees’ oversight failures. I then examine whether this association between equity-based compensation and oversight failures is affected when firms initiate the clawback provisions in their compensation contracts. I use the likelihood of restatements, the incidence of internal control weaknesses (ICW), and earnings management measures to proxy for audit committees’ oversight failures. Based on a sample of 129 firms that voluntarily adopt the clawback provisions during 2003-09 and a matched sample created from the propensity score matching technique, I find several important results. First, larger amounts and portions of stocks and options are associated with higher restatement and ICW likelihood and greater earnings management. Second, equity-based compensation appears to harm audit committees' oversight effectiveness. However, the adoption of the clawback provisions significantly mitigates such negative effect. Finally, the clawback provisions are effective in reducing restatements, ICW, and earnings management only when these provisions are triggered by "bad faith" rather than restatements. Overall, my empirical results bear policy implications on audit committees’ compensation practice and the mandatory adoption of the clawback provisions.

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission is required to propose and adopt clawback rules. After a financial statement restatement, a clawback is utilized to recover incentive compensation that was previously paid out to a manager based on the misstatement. My study investigates financial reporting executives' (FREs) decision-making after the external auditors have proposed a restatement that will lead to a clawback. I performed a web-based experiment that was electronically distributed to sixty FRE participants (i.e., CFOs, controllers, and treasurers) and manipulated executive compensation structure (i.e., a higher percentage of total compensation based on incentives or a lower percentage of total compensation based on incentives) and auditor industry specialization (i.e., industry-specialist or non-industry specialist) in a clawback environment. I hypothesized that higher incentives or the presence of a non-specialist auditor would cause FREs to be less likely to agree with an auditor's proposed restatement, more likely to involve the external auditor's national office, and more likely to request termination of the external auditors. Further, I posited that the two factors would interact for each of the three dependent variables. As predicted, my results reveal that FREs are less likely to agree with the restatement due to loss aversion when a higher proportion of their pay is incentive-based; however, auditor specialization does act to mitigate the influence of loss aversion by increasing their likelihood to accept the restatement. Additionally, I find that FREs are highly likely to request the involvement of the national office and very unlikely to request termination of the auditors across all conditions. In consideration of the upcoming clawback rules, this is a timely study that makes important contributions. First, I find an unintended negative consequence of clawback regulation, as my results indicate that clawbacks may exacerbate aggressive financial reporting decisions by FREs during a restatement negotiation. Further, I find that specialist auditors can act as effective monitors of FREs' behaviors in a clawback environment. Last, my results provide evidence for firms regarding the influence of executive compensation structures on FREs' decision-making in a clawback setting. / Ph. D.

Insiderlagstiftning är ett lagstiftningsområde som de senaste decennierna kraftigt utvecklats i de flesta rättssystem. Insiderlagstiftning består oftast utav en komplex samling lagregler och inte sällan finns det i samlingen bestämmelser specifikt gällande för personer med insynsställning i börsnoterade bolag. I EU-rättslig och i svensk rätt har det genom åren figurerat flera olika varianter av insiderregleringar. Därmed har också de specifika bestämmelserna för insynspersoner varierat. Nuvarande bestämmelse för insynspersoner regleras i art. 19 p. 11 MAR, där det stadgas att dessa insynspersoner är förbjudna att utföra några transaktioner kopplat till det egna bolagets aktie under en period om 30 dagar före bolagets offentliggörande av en finansiell rapport. Regeln syftar till att försöka utjämna det informationsövertag insynspersoner har jämtemot andra investerare genom att förhindra insynspersoner från att utföra transaktioner under vissa tidsperioder, då icke-offentliggjord bolagsinformation kan ha ett stort monetärt värde. Det kan ifrågasättas om den nuvarande regleringen i art. 19 p. 11 MAR är utformad effektivt eller om den är i behov av förändring för att på bättre sätt uppfylla dess syfte.   Inom det amerikanska, federala rättssystemet används det parallellt flera alternativa bestämmelser för att försöka stävja samma sak som regeln i art. 19 p. 11 MAR syftar till att göra. I uppsatsen visas tre exempel på alternativa regleringar från den amerikanska rätten, som alla syftar till att minska insiderhandeln.   I uppsatsen påvisas att den nuvarande regleringen i art. 19 p. 11 MAR brister i dess utformning, då den nuvarande lydelsen kvarlämnar möjligheter för insynspersoner att undslippa bestämmelsen. För att minska risken för att insynspersoner utnyttjar bristerna i regleringen torde regleringens utformning förändras. För att vidare minska riskerna för att insiderhandel begås av personer i ledande ställningar torde också nämnda reglering kompletteras med ytterligare bestämmelser.