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Assessing the Effects on Mandated Compensation Disclosures

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  • Gipper, Brandon

    (Stanford University)

Abstract

This paper analyzes the effects of mandated, management compensation disclosures on compensation levels. For identification, I use the introduction of the Compensation Discussion and Analysis (CD&A) in 2006, a significant expansion in the required disclosures related to compensation. The design uses the timing of the introduction date to compare manager pay at firms with and without the disclosure in a difference-in-differences analysis. I find evidence that disclosures are associated with increasing compensation. I corroborate this evidence with the partial rollback of the CD&A allowed by the Jumpstart Our Business Startups Act in 2012, again finding that the CD&A is associated with higher compensation. From cross-sectional tests, this compensation increase appears to be concentrated among managers with shorter tenure, at smaller firms, and in industries with higher variation in pay. Entrenched and powerful managers (CEOs, CFOs, and executive directors) do not have incremental pay increases with disclosures.

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  • Gipper, Brandon, 2016. "Assessing the Effects on Mandated Compensation Disclosures," Research Papers 3442, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3442
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    File URL: http://www.gsb.stanford.edu/faculty-research/working-papers/assessing-effects-mandated-compensation-disclosures
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    Cited by:

    1. Alexandre Mas, 2016. "Does Disclosure affect CEO Pay Setting? Evidence from the Passage of the 1934 Securities and Exchange Act," Working Papers 2016-5, Princeton University. Economics Department..
    2. Ethan Rouen, 2017. "Rethinking Measurement of Pay Disparity and its Relation to Firm Performance," Harvard Business School Working Papers 18-007, Harvard Business School.
    3. Ferri, Fabrizio & Zheng, Ronghuo & Zou, Yuan, 2018. "Uncertainty about managers’ reporting objectives and investors’ response to earnings reports: Evidence from the 2006 executive compensation disclosures," Journal of Accounting and Economics, Elsevier, vol. 66(2), pages 339-365.

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