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The unintended consequences of voluntary adoption of clawback provisions on managerial ability
Author(s) -
El Mahdy Dina
Publication year - 2020
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12528
Subject(s) - business , turnover , unintended consequences , accounting , economics , political science , management , law
I investigate the impact of the voluntary adoption of clawback provisions on managerial ability and predict that clawback provisions will motivate managers to exert more efforts following the adoption of clawback and these efforts will be in the form of an increased managerial efficiency. Using a propensity score matched sample of firms, I find a significant positive association between voluntary clawback adoption and the change in both rank and score of managerial ability. My study highlights the unintended consequences of clawback provisions on CEO 's behavior and contributes to the on‐going debate on the importance of proactively and carefully drafting clawback policies, further signifying the importance of the SEC 's efforts (Rule 10D‐1) to enforce clawback policies.