Abstract
In this study, we empirically examine whether firms remove restructuring charges from earnings for purposes of determining employer contributions to profit sharing plans. Understanding firms' non-executive compensation practices is important because compensation policies influence employee behavior and ultimately affect employees' incentives to increase shareholder value. We find that profit sharing contributions decrease as restructuring charges increase, indicating that firms do not shield profit sharing contributions from restructuring charges. Further, we find that firms are more likely to completely omit profit sharing contributions during restructuring charge years than during other years. In contrast to these results, but consistent with prior research, we find that cash compensation paid to the top executives of our sample firms is unaffected by restructuring charges. Finally, we construct several compensation asymmetry measures and find that firms treat the restructuring charge component of earnings asymmetrically for purposes of compensating different employee groups.
| Original language | American English |
|---|---|
| Pages (from-to) | 247-278 |
| Number of pages | 32 |
| Journal | Journal of Accounting and Public Policy |
| Volume | 23 |
| Issue number | 4 |
| DOIs | |
| State | Published - Jul 2004 |
ASJC Scopus subject areas
- Accounting
- Sociology and Political Science
Keywords
- Contracting
- Executive compensation
- Profit sharing
- Restructuring charges