TY - JOUR
T1 - Changing the Blame Game
T2 - Does the Presence of a Pay Ratio Disclosure Impact Nonprofessional Investors’ Reactions to CEOs’ Internal Attributions for Poor Firm Performance?
AU - Cade, Nicole L.
AU - Kaplan, Steven E.
AU - Loftus, Serena
N1 - Funding Information:
We thank Sanaz Aghazadeh, Willie Choi, Eddy Cardinaels, Brian Gale (discussant), Jonathan Jona, Cassie Mongold (discussant), Don Moser, Drew Newman, audience members at the 2019 ENEAR conference, audience members and two anonymous reviewers at the 2019 ABO Research Conference, and workshop participants at Louisiana State University, Tilburg University, Maastricht University, and WHU (Wissenschaftliche Hochschule für Unternehmensführung) for helpful comments. We also thank Arielle Laurent for research assistance.
Publisher Copyright:
© 2022, American Accounting Association. All rights reserved.
PY - 2022/6/1
Y1 - 2022/6/1
N2 - We conduct two experiments to investigate how the presence of the CEO pay ratio, a recently mandated disclosure, influences nonprofessional investors’ reactions to a CEO’s internal attributions for poor firm performance. Results of our first experiment suggest that relative to blaming oneself, blaming other firm employees for poor firm performance more effectively absolves a CEO from responsibility for poor firm performance and damages perceptions of the CEO’s trustworthiness less when a pay ratio disclosure is present versus absent. These perceptions, in turn, affect investors’ support for the CEO’s compensation and the company’s attractiveness as an investment. Our second experiment provides evidence of the underlying process, showing the pay ratio disclosure and the CEO’s attribution to other employees affects the perceived status of a CEO. Together, our findings inform managers about the impact of their attributions for poor firm performance and regulators about potential unintended consequences of pay ratio disclosures.
AB - We conduct two experiments to investigate how the presence of the CEO pay ratio, a recently mandated disclosure, influences nonprofessional investors’ reactions to a CEO’s internal attributions for poor firm performance. Results of our first experiment suggest that relative to blaming oneself, blaming other firm employees for poor firm performance more effectively absolves a CEO from responsibility for poor firm performance and damages perceptions of the CEO’s trustworthiness less when a pay ratio disclosure is present versus absent. These perceptions, in turn, affect investors’ support for the CEO’s compensation and the company’s attractiveness as an investment. Our second experiment provides evidence of the underlying process, showing the pay ratio disclosure and the CEO’s attribution to other employees affects the perceived status of a CEO. Together, our findings inform managers about the impact of their attributions for poor firm performance and regulators about potential unintended consequences of pay ratio disclosures.
KW - CEO compensation
KW - CEO-to-employee pay ratio
KW - internal attributions
KW - investment decisions
KW - management explanations
KW - pay ratio disclosure
KW - say-on-pay
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UR - http://www.scopus.com/inward/citedby.url?scp=85137198399&partnerID=8YFLogxK
U2 - 10.2308/JMAR-2021-012
DO - 10.2308/JMAR-2021-012
M3 - Article
AN - SCOPUS:85137198399
SN - 1049-2127
VL - 34
SP - 71
EP - 95
JO - Journal of Management Accounting Research
JF - Journal of Management Accounting Research
IS - 2
ER -