CEO Paycut and Earnings Forecast Behavior

Abstract

The study examines the influence of CEO paycut to their subsequent earnings forecasts We argue that paycut will result in two opposing motives: the one is to repair reputations by issuing more numbers of and substitute point estimate for range estimate the other is to avert risk so that managers will reduce the numbers of issuing and substitute range estimate for point estimate We find that managers exhibit decreased frequency of issuing earnings forecasts and substitute range estimate with point estimate following paycut Furthermore the mechanism of paycut to manager earnings forecast behaviors is more significant to less sophisticated managers However we do not find the relation between paycut and forecast bias In summary our results suggest that once managers are cut their pay the motive of risk aversion dominantly influence their earnings forecast behavior

Date of Award	2019
Original language	English
Supervisor	Ting-Kai Chou (Supervisor)