Accounting Measurement Bias and Executive Compensation Systems

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Description

This dissertation presents empirical evidence intended to help answer two research questions. The first question asks whether executive compensation systems appear to exploit the bias in accounting-based performance measures in order to reduce the volatility in executive compensation and to allocate incentives more effectively across the range of activities performed by the executive. The second question asks whether compensation systems systematically differ between firms that use alternative accounting methods and whether any such systematic difference helps explain accounting choice. Parameters estimated in fixed-effects endogenous switching regression models were used to test the risk-shielding and incentive-allocation hypotheses. The models were estimated ... continued below

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v, 107 leaves

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Boone, Jeffery Paul December 1994.

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This dissertation is part of the collection entitled: UNT Theses and Dissertations and was provided by UNT Libraries to Digital Library, a digital repository hosted by the UNT Libraries. It has been viewed 246 times , with 6 in the last month . More information about this dissertation can be viewed below.

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  • Boone, Jeffery Paul

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Description

This dissertation presents empirical evidence intended to help answer two research questions. The first question asks whether executive compensation systems appear to exploit the bias in accounting-based performance measures in order to reduce the volatility in executive compensation and to allocate incentives more effectively across the range of activities performed by the executive. The second question asks whether compensation systems systematically differ between firms that use alternative accounting methods and whether any such systematic difference helps explain accounting choice. Parameters estimated in fixed-effects endogenous switching regression models were used to test the risk-shielding and incentive-allocation hypotheses. The models were estimated across a dataset consisting of 1151 executive-year observations of annual compensation paid to 222 top-level executives in 40 oil and gas firms. The dataset was partitioned by accounting method and separate models estimated for the full cost and successful efforts partitions. The tests provided modest support for the risk-shielding and incentive-allocation hypotheses, revealing that accounting measurement bias is used to focus incentives for effort in the exploration activity and to reduce executives' exposure to production risk. The design also allowed an estimate of the proportional change in compensation that was realized from the accounting choice actually made.

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v, 107 leaves

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UNT Theses and Dissertations

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  • December 1994

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  • March 26, 2014, 9:30 a.m.

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  • Nov. 14, 2014, 10:13 a.m.

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Boone, Jeffery Paul. Accounting Measurement Bias and Executive Compensation Systems, dissertation, December 1994; Denton, Texas. (digital.library.unt.edu/ark:/67531/metadc278949/: accessed May 22, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; .