Impact of internal control material weaknesses on executive compensation: evidence from Iran

Q4 Economics, Econometrics and Finance
Z. Hajiha, Mohammad S. Bazaz
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引用次数: 7

Abstract

After several financial scandals of large companies and the approval of the Sarbanes-Oxley Act, management performance and responsibilities were formalised by launching and maintaining an effective internal control system. Different criteria and financial tools were applied for management performance measurements. These criteria are often used for rewarding and compensating managers. This study investigates non-financial criteria as a rewarding measure for Iranian executive compensation. Managers know that a lack of an effective internal control system can increase the difficulty of accomplishing the company mission, maintaining profitability, and minimising unexpected events. Therefore, the present paper aims at explaining the relationship between internal control material weaknesses and managers' compensation in the years 2004-2010 in an Iranian context. We examined a sample of 97 firms (679 firm-year observations) with combined regression and a pooled model. Results revealed an inverse relationship between the executive compensation and internal control material weaknesses. It can be concluded that the executive compensation is decreased by increasing the company's internal control weakness.
内部控制实质性缺陷对高管薪酬的影响:来自伊朗的证据
在几起大公司的财务丑闻和《萨班斯-奥克斯利法案》(Sarbanes-Oxley Act)获得批准后,通过启动和维护有效的内部控制系统,管理层的绩效和责任得以正规化。采用不同的标准和财务工具来衡量管理业绩。这些标准通常用于奖励和补偿管理人员。本研究探讨了非财务标准作为伊朗高管薪酬的奖励措施。经理们知道,缺乏有效的内部控制系统会增加完成公司使命、保持盈利能力和尽量减少意外事件的难度。因此,本文旨在解释2004-2010年伊朗背景下内部控制实质性缺陷与管理者薪酬之间的关系。我们对97家公司(679家公司年观察)的样本进行了综合回归和汇总模型的检验。结果显示,高管薪酬与内部控制实质性缺陷呈负相关。可以得出结论,高管薪酬随着公司内部控制薄弱程度的增加而降低。
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
CiteScore
0.70
自引率
0.00%
发文量
7
期刊介绍: IJAAPE publishes original scholarly papers across the whole spectrum of: financial accounting, managerial accounting, accounting education, auditing, taxation, public sector accounting, capital market and accounting, accounting information systems, performance evaluation, corporate governance, ethics, and financial management. All methodologies, such as analytical, empirical, behavioural, surveys, and case studies are welcome. IJAAPE encourages contributions especially from emerging markets and economies in transition and studies whose results are applicable across nation states or capable of being adapted to the different accounting and business environments.
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