Implications of Clawback Adoption in Executive Compensation Contracts: A Survey of Recent Research

While clawback provisions have been used in legal cases for decades, only after the passage of the Sarbanes‐Oxley Act of 2002 and the Dodd‐Frank Act of 2010 has the idea of clawback provisions in executive compensation contracts begun to talk hold in the U.S. Although the Securities and Exchange Commission has yet to implement final rules regarding clawback provisions for public companies, in recent years academic researchers have begun to investigate how the voluntary adoption of clawback provisions might impact financial reporting quality, compensation paid to covered executives, firm value, and a host of other firm‐level factors. The purpose of this article is to review select relevant clawback research published in premiere accounting and finance academic journals in recent years to better gauge the implications of clawback adoption and to attempt to discern any corporate governance effects of clawback adoption.