Capitol Report: Executives obscure accounting mistakes when they hold more stock, study finds

New research suggests chief executives and chief financial officers with a high proportion of stock-based pay are more likely to downplay material accounting errors so they can maximize compensation and minimize potential liability.

“It is unsurprising,” wrote Brian Hogan, a clinical assistant professor of business administration at the University of Pittsburgh, and Case Western Reserve University associate professor of accountancy Gregory A. Jonas, “that executives take actions to maximize their compensation.”

Their study, published in the September issue of Accounting Horizons, looked at 1,178 restatements — 817 high-transparency restatements and 361 low-transparency restatements — for the period August 2004 through December 2013, using data provided by research firm Audit Analytics.

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