How Reporting on Segments of Diversified Companies Impacts Equity-Based Pay

How does financial transparency affect how CEO’s themselves are paid?

Young Jun Cho and Hojun Seo investigate how the introduction of SFAS 131, requiring companies to report performance by business segments, impacts equity-based compensation. Their research reveals that more granular disclosure reduces the need for stock-based incentives, especially in firms with weak internal oversight, but strong external scrutiny. The findings show how reporting rules can act as powerful tools of corporate governance, reshaping executive behaviour and investor influence.

Read the original research: doi.org/10.1111/1911-3846.12928