Seminar (Dept. of Accounting)

Theme：Was Sarbanes-Oxley Costly? Evidence from Optimal Contracting on CEO Compensation

Speaker：Chen Li

Time：2020-10-21 14:00

Address：Tencent Meeting

Language：English

Tencent Meeting：https://meeting.tencent.com/s/ZH6UdOpCNpdN

ID：323 318 745

Password：2333

ABSTRACT: 

This paper investigates the effects of the Sarbanes-Oxley Act (SOX) on CEO compensation, using panel data constructed for the S&P 1500 firms on CEO compensation, financial returns, and reported accounting income. Empirically SOX (i) changes the relationship between a firm’s abnormal returns and CEO compensation, (ii) changes the underlying distribution of abnormal returns, and (iii) significantly raises the expected CEO compensation in the primary sector. We develop and estimate a dynamic principal agent model of hidden information and hidden actions to explain these regularities. We find that SOX (i) increased the administrative burden of compliance in the primary sector, but reduce this burden in the service sector, (ii) increased agency costs in most categories of the firms, and (iii) reduced the off-equilibrium loss from the CEO shirking.

SHORT BIOGRAPHY: 

Chen Li is a Visiting Assistant Professor of Accounting at NYU Shanghai. Prior to joining NYU Shanghai, she was an Assistant Professor of Accountancy at Baruch College in the City University of New York. She holds a PhD and an MS from Carnegie Mellon University, and an MA, BA, and BS from Peking University. Her dissertation, “Essays on the Structural Models of Executive Compensation,” won the William W. Cooper Doctoral Dissertation Awards in Management or Management Science at Carnegie Mellon University. Her research interests cover corporate governance and empirical contract theory.