Managerial Incentives and Corporate Fraud: The Sources of Incentives Matter* Academic Article uri icon

abstract

  • Operating performance and stock return results imply that managers who commit fraud anticipate large stock price declines if they were to report truthfully, which would cause greater losses for managerial stockholdings than for options because of differences in convexity. Fraud firms have significantly greater incentives from unrestricted stockholdings than control firms do, and unrestricted stockholdings are their largest incentive source. Our results emphasize the importance of the shape and vesting status of incentive payoffs in providing incentives to commit fraud. Fraud firms also have characteristics that suggest a lower likelihood of fraud detection, which implies lower expected costs of fraud.

published proceedings

  • REVIEW OF FINANCE

altmetric score

  • 6

author list (cited authors)

  • Johnson, S. A., Ryan, H., & Tian, Y. S.

citation count

  • 295

complete list of authors

  • Johnson, Shane A||Ryan, Harley E Jr||Tian, Yisong S

publication date

  • January 2009