اثرات بررسی SOX و SEC بر حاکمیت شرکتی شرکت های بازگشتی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|109||2011||8 صفحه PDF||سفارش دهید||8500 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Advances in Accounting, Volume 27, Issue 2, December 2011, Pages 205–212
This study investigates the combined impact of the Sarbanes–Oxley Act of 2002 (SOX) and the subsequent related Securities and Exchange Commission's (SEC) initiatives on the corporate governance characteristics of firms that had historically backdated stock options. Our results show that backdating firms had both weaker board-level and committee-level corporate governance characteristics than control firms in the pre-SOX period. In contrast, backdating firms dress up their board-level governance to meet regulatory requirements but still feature weaker committee-level corporate governance in the post-SOX era.
The purpose of this study is to investigate changing corporate governance characteristics in the wake of the Sarbanes–Oxley Act of 2002 (SOX) and related subsequent SEC initiatives3 on firms that historically backdated stock options. Stock-option backdating occurs when stock-option grants are dated to an earlier period/date when the stock price was lower. Backdating results in a lower exercise price for the option recipients to the disadvantage of the issuing company's stockholders. Backdating is inherently deceptive and manipulative; and, as such, highlights poor corporate governance.4 Prior to SOX, stock-option granting practices were lax. Furthermore, the filing period for insiders to report receiving stock-option grants was late: 45 days after fiscal year end. SOX and the national securities exchanges now require companies to have fully independent directors on their compensation committees5 to oversee executive compensation and halt option backdating, and the SEC requires stock options to insiders to be reported within two business days. Previous studies (e.g., Bebchuk et al., 2010, Collins et al., 2009 and Minnick and Zhao, 2009) have linked backdating to firms with weaker corporate governance. Specifically, Collins et al. (2009) find that less independent boards and boards with a higher percentage of directors selected by incumbent CEOs associate with backdating practices; and Minnick and Zhao (2009) find that directors whose option values are more sensitive to stock prices associate with backdating firms. In addition, Bebchuk et al. (2010) find that lucky options (options granted at the lowest price in the month and hence guaranteed to rise in value) are more likely to be backdated. Bebchuk et al. (2010) further report that board directors oftentimes appear complicit as they are likely to receive backdated stock options at the same dates as their CEOs when the companies have entrenched boards. In contrast to previous studies (e.g., Bebchuk et al., 2010, Collins et al., 2009 and Minnick and Zhao, 2009), this study investigates the exogenous link between regulatory reform on changing corporate governance and backdating practices. While Heron and Lie, 2009 and Huang and Lu, 2010 find that unscheduled grant dates have an association with backdating even after the passage of SOX, we expect that compensation committee-governance characteristics are associated with backdating practices even in the post-SOX era. We use 816 firm-year observations to compare the changing corporate governance characteristics of the backdating firms to those of the control group (non-backdating firms) between pre- and post-SOX periods. Furthermore, we use nine dummy corporate governance measures to construct three summary scores6 for examining what level of corporate governance firms was manipulated for backdating schemes. The three summary scores are firm-level, board-level, and committee-level summary scores. The higher the summary governance score, the weaker the corporate governance is, which indicates that a firm is more likely to be involved in a backdating scheme. Our findings show that backdating firms had both weaker board-level and committee-level summary governance scores than control firms in the pre-SOX period. In the post-SOX era, backdating firms dress up board-level corporate governance but still feature weaker committee-level corporate governance. Especially, backdating firms still use unscheduled dates to time option grants although they change leadership by replacing founder–CEOs. In addition, we find that backdating firms grant a higher percentage of stock options to their CEO compensation than control firms in the post-SOX era. Our study contributes to the corporate governance literature in three aspects. First, we complement previous studies (e.g., Bebchuk et al., 2010, Collins et al., 2009 and Minnick and Zhao, 2009) by investigating the combined impact of SOX and the SEC initiatives on changing corporate governance and backdating practices. Second, we decompose our governance measures into three summary scores to examine what level of corporate governance firms was manipulated for backdating. Third, we use the IRRC (currently RiskMetrics) data to corroborate our hand-collected data and conduct different tests to verify our findings. In the next section, we review the literature and develop our hypothesis. In Section 3, we describe our research design, sample collection procedures, and operational definitions of the observed variables. We present our descriptive statistics and empirical results in Section 4 and conclude our findings in Section 5
نتیجه گیری انگلیسی
In this study, we examine the combined impact of two exogenous events: the regulatory effect of SOX and the SEC initiatives on changing corporate governance characteristics and backdating practices in three periods—pre-SOX, post-SOX and the SEC investigation periods. Consistent with prior studies (e.g., Collins et al., 2009), our findings show that backdating firms are associated with weaker corporate governance. In particular, backdating firms had both weaker board-level and committee-level corporate governance than control firms in the pre-SOX period. In the post-SOX era, backdating firms have strengthened their board and committee independence with more delegated and diligent committees. In aggregate, backdating firms dress up their board-level governance to meet the regulatory requirements of SOX and the SEC investigation on backdating. The results support our hypothesis that backdating firms have weaker committee-level governance than control firms in the post-SOX era. Especially, consistent with Huang and Lu (2010), backdating firms might still use unscheduled grant dates to continue timing stock-option granting practices.