Fair Value Accounting and CEO Cash Compensation

• Main Authors: Chia-Hsuan Tsai, 蔡佳璇
• Other Authors: 李艷榕
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/50647064893731348844

碩士 === 國立臺灣大學 === 會計學研究所 === 101 === In this paper, I examine how fair value accounting affects the contractual role of reported earnings and whether the use of fair value accounting reduces the use of reported earnings in determining CEO’s cash compensation. I first investigate whether adopting FVO would decrease the use of reported earnings in CEO’s cash compensation after the adoption of SFAS 159. Empirical evidence suggests that firms place a smaller weight on earnings when determining CEOs’ cash compensation contracts after the adoption of SFAS 159. Focusing in the post SFAS 159 period, I investigate the effects of the magnitude of net fair value assets on the weight on earnings when determine CEOs’ cash compensation. I find that when the absolute value of net fair value assets is larger, firms are also like to place smaller weight on earnings when determine CEOs’ cash compensation. This result provides evidence that net fair value assets affect the use of accounting information in compensation contracts. Decomposing net fair value assets into three different levels, I do not find significant evidence on Level 3 net fair value assets having a more unfavorable effect on the relation between reported earnings and the CEO’s cash compensation than Level 1 and Level 2 net fair value assets.