Does the Mandatory Conflict-of-Interest Disclosure Affect Firms' Choice of Compensation Consultants?
In December 2009, the SEC required the listed firm to disclose information related to the conflict of interest between the firm and its executive compensation consultant. Using hand collected data, we examine firms’ response to this new regulation. We show that after the SEC’s rule, there is an increase in the likelihood of firms switching from conflict-of-interest compensation consultants to independent consultants and that this increase is more pronounced for firms paying CEOs excessively. However, the switch, in general, does not affect excessive CEO compensation. In addition, the effect of the switch varies with institutional ownership: the switch results in a greater reduction in excessive CEO pay for firms with high institutional ownership than for firms with low institutional ownership. Overall, our results suggest that the SEC’s rule increases firms’ costs of hiring conflict-of-interest consultants but it does little to address investors’ concern over excessive CEO compensation.
About the Speaker
Assoc Professor Huai Zhang received his PhD degree from Columbia University in 2000. He taught at University of Illinois at Chicago and University of Hong Kong before joining Nanyang Business School. His research interests are in valuation, earnings management and financial analysts. He has published at major accounting and finance journals, such as Journal of Accounting and Economics, Journal of Finance and Review of Accounting Studies.
The Centre for Accounting and Auditing Research regularly organises research seminars featuring accountancy professors from renowned business schools.
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