Operating Cash Flows and Earnings Target Revision: Evidence from Annual Cash Bonus Plans for CEOs

IF 1.4 Q3 BUSINESS, FINANCE

Journal of Management Accounting Research Pub Date : 2021-04-09 DOI:10.2308/JMAR-19-037

L. Li, Shuyang Wang, Wei Zhu

引用次数: 0

Abstract

We empirically examine the impact of operating cash flows on future earnings targets in CEOs' annual cash bonus plans. Using target and actual compensation earnings-per-share (EPS) disclosed in proxy statements of large U.S. public firms, we find that operating cash flows have no significant incremental effects on the revision of future earnings targets in the presence of current earnings. We also observe a positive association between future target achievability and current operating cash flows, indicating that firms with higher operating cash flows set significantly easier future earnings targets for their CEOs. These findings suggest that the higher persistence of operating cash flows in predicting future earnings is not fully incorporated into target setting. Further analyses reveal that the positive association between future target achievability and current operating cash flows is attributable to both expectation bias and contractual considerations to reward CEOs who deliver greater cash flows and to limit activities that sacrifice cash flows.

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经营性现金流量与盈利目标修正:来自ceo年度现金奖励计划的证据

我们实证研究了运营现金流对CEO年度现金奖金计划中未来盈利目标的影响。使用美国大型上市公司委托书中披露的每股目标和实际薪酬收益，我们发现，在当前收益的情况下，经营现金流对未来收益目标的修正没有显著的增量影响。我们还观察到，未来目标的可实现性与当前经营现金流之间存在正相关，这表明经营现金流较高的公司为其首席执行官设定的未来盈利目标要容易得多。这些发现表明，在预测未来收益时，经营现金流的持续性较高，这并没有完全纳入目标设定。进一步的分析表明，未来目标的可实现性和当前经营现金流之间的正相关既可归因于预期偏差，也可归因于合同考虑，以奖励提供更多现金流的首席执行官，并限制牺牲现金流的活动。

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

Journal of Management Accounting Research BUSINESS, FINANCE-

CiteScore

2.90

自引率

5.90%

发文量

期刊介绍： The mission of the Journal of Management Accounting Research (JMAR) is to advance the theory and practice of management accounting through publication of high-quality applied and theoretical research, using any well-executed research method. JMAR serves the global community of scholars and practitioners whose work impacts or is informed by the role that accounting information plays in decision-making and performance measurement within organizations. Settings may include profit and not-for profit organizations, service, retail and manufacturing organizations and domestic, foreign, and multinational firms. JMAR furthermore seeks to advance an understanding of management accounting in its broader context, such as issues related to the interface between internal and external reporting or taxation. New theories, topical areas, and research methods, as well as original research with novel implications to improve practice and disseminate the best managerial accounting practices are encouraged.