The statistical tests used in the analysis of structural equation models with unobservable variables and measurement error are examined. A drawback commonly applied chi square test, addition to known problems related sample size power, is that it may indicate an increasing correspondence between hypothesized model observed data as both properties relationship constructs decline. Further, contrary common assertion, risk making a Type II can be substantial even when large. Moreover, present...

The statistical tests used in the analysis of structural equation models with unobservable variables and measurement error are examined. A drawback commonly applied chi square test, addit...

Several issues relating to goodness of fit in structural equations are examined. The convergence and differentiation criteria, as applied by Bagozzi, shown not stand up under mathematical or statistical analysis. authors argue that the choice interpretative statistic must be based on research objective. They demonstrate when this is done Fornell-Larcker testing system internally consistent it conforms rules correspondence for data abstract variables.

Several issues relating to goodness of fit in structural equations are examined. The convergence and differentiation criteria, as applied by Bagozzi, shown not stand up under mathematical or...

Abstract We find that measures of board and ownership structure explain a significant amount cross-sectional variation in CEO compensation, after controlling for standard economic determinants pay. Moreover, the signs coefficients on variables suggest CEOs earn greater compensation when governance structures are less effective. also predicted component arising from these characteristics has statistically negative relation with subsequent firm operating stock return performance. Overall, our...

We explain when and how staggered difference-in-differences regression estimators, commonly applied to assess the impact of policy changes, are biased. These biases likely be relevant for a large portion research settings in finance, accounting, law that rely on treatment timing, can result Type-I Type-II errors. summarize three alternative estimators developed econometrics literature addressing these biases, including their differences tradeoffs. apply re-examine prior published results...

This paper examines three questions on the value relevance of customer satisfaction measures: (1) Are measures leading indicators accounting performance? (2) Is economic (fully) reflected in contemporaneous book values? And (3) Does release provide new or incremental information to stock market? Many argue that improvements areas such as quality, employee satisfaction, and innovation represent investments firm-specific assets are not fully captured current measures. According these authors,...

The empirical research examining the association between typical measures of corporate governance and various accounting economic outcomes has not produced a consistent set results. We believe that these mixed results are partially attributable to difficulty in generating reliable valid for complex construct is termed “corporate governance.” Using sample 2,106 firms 39 structural (e.g., board characteristics, stock ownership, institutional activist existence debtholders, mix executive...

Using confidential data of executive-specific short-term bonus plans, we investigate the extent to which executives manipulate earnings maximize present value plan payments. As such, this paper extends work Healy (1985). Like Healy, find evidence consistent with hypothesis that managers downwards when their bonuses are at maximum. Unlike no below minimum necessary receive any bonus. We demonstrate Healy's results lower bound likely be induced by his methodology.

Prior research has provided useful insights into the structure of compensation plans and their incentive effects.' However, one important limitation these studies is virtual absence any cross-sectional analyses attributes contracts.2 This related, in part, to problems associated with controlling for other factors that affect compensation. That is, contracts are

This paper analyzes the valuation of a compensation contract from manager's perspective. perspective is appropriate, for example, in research on incentive effects plan, because such are determined by how actions affect his compensation. In contrast, study cost-effectiveness shareholders' appropriate. Measuring value to manager difficult some diverse components packages (e.g., executive stock options and restricted stock) have payoffs that uncertain when granted. most empirical studies, each...

This study examines how different types of performance measures were weighted in a subjective balanced scorecard bonus plan adopted by major financial services firm. Drawing upon economic and psychological studies on evaluation compensation criteria, we develop hypotheses regarding the weights placed measures. We find that subjectivity allowed superiors to reduce “balance” awards placing most weight measures, incorporate factors other than evaluations, change criteria from quarter quarter,...

We examine the relation between fees paid to auditors for audit and non‐audit services, choice of accrual measures a large sample firms. Using our pooled sample, we find that ratio total has positive with absolute value accruals similar Frankel, Johnson, Nelson [2002]. However, using latent class mixture models identify clusters firms homogenous regression structure reveals this association only occurs about 8.5% sample. In contrast fee results, consistent evidence negative level (both...

ABSTRACT This study examines whether Chief Executive Officer (CEO) equity‐based holdings and compensation provide incentives to manipulate accounting reports. While several prior studies have examined this important question, the empirical evidence is mixed existence of a link between CEO equity irregularities remains an open question. Because inferences from may be confounded by assumptions inherent in research design choices, we use propensity‐score matching assess hidden (omitted...

0 The financial support of Peat Marwick Main & Co., Ernst Young, David Hauck, and the Reginald H. Jones Center for Management Policy, Strategy, Organization is gratefully acknowledged. We would like to thank Sherwin Rosen, Stanley Baiman, Marshall Meyer, three anonymous reviewers, workshop participants at Wharton School, Harvard Business Washington University, Northwestern Odense Uppsala Shore Conference on Strategic Models their helpful comments. To improve understanding design...