Audit committee equity incentives and stock price crash risk

IF 1.9 Q2 BUSINESS, FINANCE

Review of Quantitative Finance and Accounting Pub Date : 2023-12-30 DOI:10.1007/s11156-023-01233-5

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Abstract

This paper theoretically and empirically investigates whether and how audit committee (AC) equity incentives affect future stock price crash risk. Consistent with our model prediction that equity incentives for ACs contribute to reducing the skewness of return distributions, we document evidence of a negative relationship between AC equity incentives and expected crash risk for a merged sample of 6550 US-listed firms over the 2001–2018 period, even after controlling for a wide range of other firm characteristics, using alternative variable specifications, and addressing potential endogeneity concerns. On average, a one-standard-deviation increase in AC equity incentives is associated with a reduction of 14.09–15.46% in stock price crash risk. Further analysis shows that AC equity incentives affect crash risk through financial reporting quality, the negative relationship between AC equity incentives and future stock price crash risk is more pronounced for firms with weaker external governance and for firms with more financial expertise in the AC, and this negative relationship is mainly driven by option-based equity incentives. Taken together, these findings are consistent with the view that equity-based compensation is critical for inducing greater monitoring efforts from AC members and mitigating managerial incentives to withhold bad news.

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审计委员会股权激励与股价暴跌风险

摘要本文从理论和实证角度研究了审计委员会（AC）的股权激励是否以及如何影响未来的股价暴跌风险。我们的模型预测审计委员会的股权激励有助于降低回报率分布的偏度，与这一预测相一致，在 2001-2018 年期间，我们记录了审计委员会股权激励与 6550 家美国上市公司合并样本的预期股价暴跌风险之间存在负相关关系的证据，即使在控制了广泛的其他公司特征、使用了替代变量规格并解决了潜在的内生性问题之后也是如此。平均而言，AC 股权激励每增加一个标准差，股价暴跌风险就会降低 14.09%-15.46%。进一步的分析表明，AC 股权激励通过财务报告质量影响股价暴跌风险，AC 股权激励与未来股价暴跌风险之间的负相关关系对于外部治理较弱的公司和 AC 中拥有更多财务专业知识的公司更为明显，并且这种负相关关系主要是由基于期权的股权激励所驱动的。综合来看，这些发现与以下观点是一致的，即基于股权的薪酬对于诱导咨询委员会成员加大监督力度和减轻管理者隐瞒坏消息的动机至关重要。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Review of Quantitative Finance and Accounting BUSINESS, FINANCE-

CiteScore

3.20

自引率

17.60%

发文量

期刊介绍： Review of Quantitative Finance and Accounting deals with research involving the interaction of finance with accounting, economics, and quantitative methods, focused on finance and accounting. The papers published present useful theoretical and methodological results with the support of interesting empirical applications. Purely theoretical and methodological research with the potential for important applications is also published. Besides the traditional high-quality theoretical and empirical research in finance, the journal also publishes papers dealing with interdisciplinary topics.