Appendix A Summarization of the empirical findings of prior research. Author(s) Year Title paper Journal Object of study Sample (sample size, Methodology Results country, research period) #1 Cheng Q., D.B. 2008 Earnings The Compensation The sample size of this For each restatement firm Restatement firms, compared to Farber restatements, Accounting contracts of CEO’s study is 289 restatements compensation data is collected. control firms, reduce the changes in Review following an from the period of 1997 to First the pre- and proportion of CEO’s total CEO earnings 2001 from companies who levels of compensation that is compensation, restatement. are listed at the NYSE, the restatement firms' CEO option following a restatement. and firm AMEX or the Nasdag. grants is compared to calculate Thus, restatements firms are performance the change in option grants likely to view reducing around restatements. Then this compensation as an change is compared to the important means of reducing change in option grants for their agency problems. control group over the same Furthermore, the authors find period. Furthermore, there is evidence of improved operating examined whether the performance following the reducting in option-based reduction in option-based compensation leads to compensation. improved performance.
Appendix A Summarization of the empirical findings of prior research. Author(s) Year Title paper Journal Object of study Sample (sample size, country, research period) Methodology Results #1 Cheng Q., D.B. Farber 2008 Earnings restatements, changes in CEO compensation, and firm performance The Accounting Review Compensation contracts of CEO’s following an earnings restatement. The sample size of this study is 289 restatements from the period of 1997 to 2001 from companies who are listed at the NYSE, the AMEX or the Nasdag. For each restatement firm compensation data is collected. First the pre- and levels of restatement firms' CEO option grants is compared to calculate the change in option grants around restatements. Then this change is compared to the change in option grants for control group over the same period. Furthermore, there is examined whether the reducting in option-based compensation leads to improved performance. Restatement firms, compared to control firms, reduce the proportion of CEO’s total compensation that is following a restatement. Thus, restatements firms are likely to view reducing compensation as an important means of reducing their agency problems. Furthermore, the authors find evidence of improved operating performance following the reduction in option-based compensation.