Thesis (Ph. D.)--University of Hong Kong, 2000. / Includes bibliographical references (leaves 214-224).

Thesis (Ph. D.)--University of Chicago, Dept. of Economics, August 2002. / Includes bibliographical references. Also available on the Internet.

Thesis (Ph. D.)--University of Texas at Austin, 2007. / Vita. Includes bibliographical references.

Thesis (M.S.)--Virginia Polytechnic Institute and State University, 1991. / Vita. Abstract. Includes bibliographical references (leaves 106-110). Also available via the Internet.

Background & Subject discussion: Financial reporting and earnings affect stakeholders’ decisions and is a vital component in firm’s information disclosure. Management possesses considerable influence over financial reports. Earnings consist of a cash-flow and accrual component. Earnings can be affected by managers’ judgment and decision either by accrual-based earnings management or real activities manipulation. Earnings management affects the relevance and reliability of financial reporting and is widely researched. Europe is consolidating and accounting and audit standards are harmonizing. Real activities manipulation is unobserved in Europe. Increased attention and regulations of earnings management are inducing more creative methods to alter earnings, such as stock repurchases. Purpose: The main purpose of this study is to investigate if real activities manipulation can be observed in Europe and to what extent in relationship to accrual-based activities to avoid reporting small losses. An underlying purpose is to study different methods of RAM, including some newer approaches to detect hypothesized RAM by stock repurchases. An additional purpose is to evaluate the different utilized detection methods to clarify effectiveness. The final purpose is to consider possible effects of EM on reliability and relevance of financial reporting. Conclusion: The result concludes that earnings management are performed by real activities manipulation. Stock repurchases, decreased discretionary expenses and production cost all indicate earnings management to avoid reporting earnings below a specific benchmark. The result questions the reliability and relevance of reported earnings.

This research examines the exit of a subsidiary from its corporate parent through spin-off, the actions taken by the firm management post spin-off, and the performance implications of those actions, all from the spin-off's perspective. While spin-off announcements are generally met with a positive stock market reaction, what occurs post spin-off remains largely unexamined, with performance predictions regarding spin-off firms often being equivocal. This raises questions as to what generates positive performance for spin-off firms, with agency, transaction cost, and upper echelons theories offering differing, and sometimes conflicting, predictions. By integrating these theoretical perspectives, a model of managerial action and its performance implications is presented. The model examines how the formation of new top management, the establishment of managerial monitoring and incentives, and the severance effects from leaving the corporate structure affect strategic, financial, and institutional actions, and how these actions affect performance. The theory and hypotheses developed in this research are empirically tested on a sample of 176 corporate spin-offs completed by publicly traded firms between 1986 and 1997. Results for the action-based models indicate that background of the CEO or the TMT, as well as CEO options, had no effect on actions. CEO and TMT ownership had opposite effects on financial actions, with TMT ownership increasing the likelihood of strategic actions and CEO ownership increasing the likelihood of institutional actions. Ownership by the parent firm and monitoring by officers of the parent serving as board members had no effect on the likelihood of actions, although having a chairman of the board from the parent decreased the likelihood of strategic actions. Finally, severance effects had limited influence on the actions taken post spin-off. Results for the performance-based models indicate that strategic actions were negatively related to ROA, while financial and institutional actions are positively related to ROA and institutional actions are positively related to market performance. In general, inaction was related to lower Tobin's q, with the signs of the coefficients for the other performance models negative, but not significant. Finally, the spin-off firm's relationship with its corporate parent had limited effect on the link between actions and performance.

“Show me the incentive and I will show you the outcome”. Charlie Munger The use of adjusted earnings as a presentation alternative to GAAP earnings is intended to help financial statement users understand the underlying performance of a company. The approach is highly prevalent and growing in frequency and adjustment magnitude, as “by 2017, for example the average adjustment per firm was 26 cents per share or about 15% of average GAAP earnings per share” (Rouen, So, and Wang, 2020, p. 3). While some adjustments are standard adjustments for non-recuring items like accounting rule changes, or part of a set of consistently communicated recurring items, there is another group of adjustments that are infrequent, subject to considerable management latitude and often inconsistently categorized. Across the range of academic research on this phenomenon, there are questions regarding management motivation, communication clarity and persistence of these non-GAAP adjustments. There is a broader question regarding business decision rigor, and quality of earnings versus peers for those firms with a large adjusted to reported earnings difference. In Chapter 3, I assess the consequences of the use of Adjusted Earnings, by testing whether the size of the difference between reported and adjusted earnings is associated with a difference in performance against a set of key firm performance measures. The underlying hypothesis is that firms with a large adjusted-earnings differential have weaker underlying operational performance, compared to their peers and that ultimately the decisions and adjustment actions being taken (e.g., more acquisitions, business reorganizations or “one-offs”) that drive up the earnings adjustment subsequently erode performance. The study of a set of large New York Stock Exchange (NYSE) listed companies over a ten-year period (2011 through 2020) showed that firms with large adjusted-earnings differentials had statistically significant performance gaps versus peers that had smaller earnings adjustments on return on assets (ROA) and return on equity (ROE), both contemporaneously and prospectively. There were also performance differences in current year total shareholder return (TSR), although that was mostly a short-term phenomenon and did not hold for future TSR. The study results were particularly significant for the operational measure return on assets (ROA). The tests controlled for firm sector, size and leverage ratio. In Chapter 4, I examine whether CEO incentive compensation (total current year variable pay, variable pay as a percentage/fraction of total compensation, and unvested equity) is a possible cause of the expanded use of Adjusted Earnings practices, and associated with the size of the difference between adjusted and reported earnings. The hypothesis for this follow-on study was that CEO incentives are enhanced by a higher adjusted earnings number, given the typical structure of incentive plans and thus they could influence higher adjusted-earnings differentials. The literature is mixed on this topic as some studies like Black, Black, Christensen and Gee (2021) show no significant relationship between CEO pay and aggressive non-GAAP earnings reporting, while others show that large positive non-GAAP earnings adjustments predict abnormally high CEO Pay (Guest, Kothari and Pozen, 2017). Cohen, Dey and Lys (2008) found that unexercised options were positively associated with income-increasing accrual-based earnings management activities, but that activity is not necessarily impacting reported performance measures (p. i). This second study, found only partial statistical support for the hypothesis that current year variable compensation was associated with the Adjusted Earnings differential, but it was inconclusive. There was statistical significance for the tests of the variable compensation ratio and total unvested equity being related to future adjusted earnings differentials, but those findings were at a relatively low significance level. / Business Administration/International Business Administration

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.

<p>Purpose: Although under the last decade there has been increased interest in management of project-based teams and numerous examples of such relationships exist, relatively little is known about “the dynamics of shorter relationships”. Management of communication between partners involved in short-term project-based relationships and the ways, in which multiparty value is created as a result, form a task for important and necessary research in marketing theory and practice. This study aims to define whether there exists a positive relationship between management activities that can influence the communication environment within project-based groups and effectiveness of collaboration between participants.</p><p>Research question: In what role management incentives can positively influence communication and collaboration within a network of the external parties involved in a project?</p><p>Approach: The research design for this study includes a literature review and a longitudinal observational case study. The aim was drawing on and extending important ideas of research on organizational management of project-based teams. On the basis of literature review aspects that have the most influential impact on communication within project-based networks are organized in a integrative framework that gives an image of factors influencing relationships in project-based teams. The theoretical model is proved through a qualitative study of project-based teams performance. Data was collected through the use of meetings observations, email interviewing of participants and informal interviews.</p><p>Findings: Although sensemaking and relational exchanges are distinct concepts in the extant literature, this study illustrates the ways in which the two are interconnected: the social processes of relational exchanges between project participants engaging in the proceses of sensemaking and the ways of approaching relational exchanges that would facilitate the process of sensemaking. On the basis of the theoretical discussion how projects are operated while being embedded in a context of networks of external participants we elaborated that for successful project performance management of project-based networks should play facilitating and supportive role of creating a framework enabling mindful behaviour and collaborative processes of problem-solving.</p><p>Research limitations/implications: Even this study highlights previously overlooked connections between literatures on relational exchanges and organizational sensemaking by giving attention to a diverse range of issues concerning project-based business networks, further research in this direction may be useful for deeper understanding of the processes. Firstly, the generalizability of the findings presented here remains to be tested. Secondly, the aspects influencing relational exchanges in short-term project setting identified here may not be exhaustive: they could be supplemented by the discovery of other aspects, perhaps through data collected from project setting of different type. Thirdly, although relational exchanges can vary in sense of communication and collaboration intensity, it was outside the scope of this study to address the issue at this level of analysis. Despite these limitations, this study has made an attempt to draw up the findings that may have some implications for both research and practice.</p><p>Value of research: As revealed in our study, a set of management incentives may help in creating a positive environment for efficient communication and collaboration within a project. It suggests that management incentives should try to organize a trust like environment that will provide much of incentive for partners to work together non-opportunistically during their relational exchanges and much of the assurance necessary for exchange partners to feel comfortable with this arrangement. The results of the study clearly shows that applying management methods will help shortcut the process necessary to establish the working norms necessary for functional communication and collaboration between participants.</p>

Purpose: Although under the last decade there has been increased interest in management of project-based teams and numerous examples of such relationships exist, relatively little is known about “the dynamics of shorter relationships”. Management of communication between partners involved in short-term project-based relationships and the ways, in which multiparty value is created as a result, form a task for important and necessary research in marketing theory and practice. This study aims to define whether there exists a positive relationship between management activities that can influence the communication environment within project-based groups and effectiveness of collaboration between participants. Research question: In what role management incentives can positively influence communication and collaboration within a network of the external parties involved in a project? Approach: The research design for this study includes a literature review and a longitudinal observational case study. The aim was drawing on and extending important ideas of research on organizational management of project-based teams. On the basis of literature review aspects that have the most influential impact on communication within project-based networks are organized in a integrative framework that gives an image of factors influencing relationships in project-based teams. The theoretical model is proved through a qualitative study of project-based teams performance. Data was collected through the use of meetings observations, email interviewing of participants and informal interviews. Findings: Although sensemaking and relational exchanges are distinct concepts in the extant literature, this study illustrates the ways in which the two are interconnected: the social processes of relational exchanges between project participants engaging in the proceses of sensemaking and the ways of approaching relational exchanges that would facilitate the process of sensemaking. On the basis of the theoretical discussion how projects are operated while being embedded in a context of networks of external participants we elaborated that for successful project performance management of project-based networks should play facilitating and supportive role of creating a framework enabling mindful behaviour and collaborative processes of problem-solving. Research limitations/implications: Even this study highlights previously overlooked connections between literatures on relational exchanges and organizational sensemaking by giving attention to a diverse range of issues concerning project-based business networks, further research in this direction may be useful for deeper understanding of the processes. Firstly, the generalizability of the findings presented here remains to be tested. Secondly, the aspects influencing relational exchanges in short-term project setting identified here may not be exhaustive: they could be supplemented by the discovery of other aspects, perhaps through data collected from project setting of different type. Thirdly, although relational exchanges can vary in sense of communication and collaboration intensity, it was outside the scope of this study to address the issue at this level of analysis. Despite these limitations, this study has made an attempt to draw up the findings that may have some implications for both research and practice. Value of research: As revealed in our study, a set of management incentives may help in creating a positive environment for efficient communication and collaboration within a project. It suggests that management incentives should try to organize a trust like environment that will provide much of incentive for partners to work together non-opportunistically during their relational exchanges and much of the assurance necessary for exchange partners to feel comfortable with this arrangement. The results of the study clearly shows that applying management methods will help shortcut the process necessary to establish the working norms necessary for functional communication and collaboration between participants.