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مقاله انگلیسی پاداش تشویقی ،اختیارات حسابداری و سرمایه بانک

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کد محصول: H361

قیمت فایل ترجمه شده: برای اطلاع از هزینه و مدت زمان انجام ترجمه با پشتیبانی وب سایت تماس حاصل نمایید (۰۹۳۷۲۵۵۵۲۴۰)

تعداد صفحه انگلیسی: ۲۲

سال نشر: ۲۰۱۸

عنوان فارسی:

مقاله انگلیسی حسابداری ۲۰۱۸ : پاداش تشویقی ،اختیارات حسابداری و سرمایه بانک

عنوان انگلیسی:

Incentive compensation, accounting discretion and bank capital

Abstract

This paper examines the impact of the U.S. banking agencies’ recent guidance on incentive compensation on efforts to have banks build countercyclical capital buffers that can absorb losses during periods of economic weakness. The connection arises from the impact of the compensation guidelines on bank senior managers’ incentives to engage in earnings management. The compensation guidelines for senior managers call for reduced sensitivity of compensation to short-term performance at the higher range of accounting performance, for the deferral of bonus payments over several years with the amount vested reduced for poor accounting performance and the payment of bonuses in equity linked instruments.

The results suggest that the parts of the guidance related to accounting earnings based compensation create earnings management incentives that are consistent with countercyclical capital buffers. However, the parts that encourage the payment of compensation in the form of equity-linked instruments may create incentives for senior managers to reduce capital buffers during periods of higher earnings.

Keywords : Incentive compensation,Accounting discretion,Bank countercyclical capital

introduction

This paper examines unintended consequences that the supervision of bank incentive compensation has on banks’ incentives to build countercyclical capital buffers.1 The idea behind countercyclical capital buffers is that banks should increase their buffers for absorbing losses in good times and use these buffers to absorb losses during economic downturns. Much of the policy discussion has related to varying the numerical capital requirements over the business cycle with higher requirements during boom times.2 Policymakers, however, recognize that another way of building such a buffer would be by requiring banks to build up their loan loss allowance during good times and allowing it to drop during weakness as was done with Spain’s dynamic provisioning requirements.

۳ What is perhaps less well recognized is that earnings management through discretionary accounting policies can have the effect of building up or reducing buffers. For example, if a bank is using earnings management to smooth reported earnings, it will under-report earnings and capital during good periods and over-report earnings (and possibly capital) during periods of economic weakness.

Whether and how senior bank managers engage in earnings management will depend on the impact of reported earnings on their incentive compensation (IC). Bank executive IC has become a topic of considerable interest to bank supervisors since the crisis, in large part due to concerns that poorly structured IC systems encouraged bank employees to take excessive risk.4 In July 2010, the Board of Governors et al. (2010) set out supervisory guidance with regards to bank IC systems for employees that can take material risk.

۵ In most cases the guidance provides only general recommendations and lets banks decide how to implement the recommendations. However, the Board of Governors et al. (2010) lays out more specific expectations with respect to senior executives at large banking organizations, including encouraging the use of incentive compensation contracts that allow promised but as yet unpaid compensation to withheld as recently happened at Wells Fargo (2016). To the extent the Board of Governors et al. (2010) changes the way senior managers are compensated, it has the potential to impact the way in which these managers exercise their accounting discretion to manage reported earnings.

In order to analyze the impact of the Board of Governors et al. (2010) on the use of accounting discretion, this paper decomposes IC into two parts: the component whose value depends upon reported earnings and the component that depends on the stock market’s valuation of the bank.6 The part of IC that depends solely on reported earnings is analyzed in a two period model that allows for two types of IC: a variable bonus for exceeding the target and a variable penalty for missing the target. As shown below, the Board of Governors et al. (2010) may also impact the timing of payments which is analyzed via the discount rate applied to future payments.

The part of IC that depends on the market’s valuation of the bank is important because the guidance encourages banks to pay senior executives IC in the form of equity-linked instruments. Both theoretical and empirical evidence suggests that earnings management may impact a bank’s stock price implying that to the extent the Board of Governors et al. (2010) results in the greater use of equity-linked compensation that it may also impact earnings management.