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| Author: | O'Connell, V. |
| Title: | The impact of accounting conservatism on the compensation relevance of UK earnings |
| Journal: | European Accounting Review
2006 : VOL. 15:4, p. 627-649 |
| Index terms: | accounting theory earnings financial reporting executives compensation executive remuneration United Kingdom |
| Language: | eng |
| Abstract: | Since accounting (hereafter as: accng.) conservatism implies that earnings (here as: erngs.) have a lower correlation with returns in good news firm-years (as: f-yrs.), it is hypothesized that U.K. CEO cash compensation (as: comp.) exhibits a stronger (weaker) sensitivity to accng. erngs. in good (bad) news f-yrs. The empirical findings offer substantial support for this hypothesis, being robust to alternative estimation methodologies. In addition, the results appear not to be attributable to the well-established impact of erngs. persistence on the comp.-erngs. association. Overall, the findings are consistent with the notion that U.K. comp. committees appear to notice the impact of accng. conservatism when awarding erngs. based compensation. |
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