Mandatory Disclosure Reform and Executive Compensation:

• In Event: Financial Accounting Issues: International Evidence II

Abstract

We document an increase in executive compensation following the mandatory adoption of International Financial Reporting Standards (IFRS). This increase is positively correlated with the difference between pre-existing accounting standards and IFRS. Consistent with the theory that disclosure reform leads to higher executive compensation due to improved monitoring (Hermalin and Weisbach, 2012), we find the increase to be larger in countries with weaker shareholder monitoring and greater private benefits. We also find evidence that the increase is related to increased responsibility, as the increase began once the country announced its intention to adopt IFRS and is greater for CFOs than CEOs.

Authors

• Steven Balsam, Temple University

• Elizabeth Gordon, Temple University

• Xi Li, Temple University