RIEB Seminar (Jointly supported by: TJAR Workshop)
| Date&Time | Tuesday, July 14, 2015, 3:30pm-5:30pm |
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| Place | RIEB Meeting Room (Annex 2nd floor) |
| Intended Audience | Faculties, Graduate Students and People with Equivalent Knowledge |
| Language | Japanese |
| Note | Copies of the paper will be available at Office of Promoting Research Collaboration. |
3:30pm-5:30pm
| Speaker | Akinobu SHUTO |
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| Affiliation | Graduate School of Economics, The University of Tokyo |
| Topic | The Role of Accounting Conservatism in Executive Compensation Contracts |
| Abstract | In order to test the implication of Watts's (2003) argument that accounting conservatism can increase the efficiency of executive compensation contracts, we investigate the relationship between the adoption of accounting conservatism and the use of earnings-based executive compensation contracts in Japanese firms. We focus on executive compensation practice in Japan because the demand for accounting conservatism is likely to be larger for Japanese firms than for U.S. firms due to the Japanese predominance of earnings-based executive compensation contracts and the lack of explicit compensation contracts. Consistent with the proposed arguments, we find a positive relationship between accounting conservatism and the compensation earnings coefficient. We also find that the positive relationship is greater for firms with poor ex-ante information environment. These results suggest that the demand for accounting conservatism is higher for firms that use more earnings-based executive compensation contracts and that have a more serious ex post settling up problem. |