Joerg R. Werner

Why do Firms Resist Individualized Disclosure of Management Remuneration

This paper investigates firms’ decisions to resist individualized disclosure of top management compensation packages. We exploit the unique German setting, where recent legislation man-dates individualized disclosure of remuneration for members of the management board of listed corporations, but allows for an opt-out on the condition of a three-quarter majority vote of shareholders at their annual meeting. Our analyses shed light on the relative roles of man-agers’ disclosure incentives, ownership structure, and the strength of external monitoring in shaping this decision to resist individualized compensation disclosures. Our findings indicate that the compensation level and particularly payments over industry average are positively associated with disclosure resistance, while variable compensation components are conducive to transparency. We also find that appointment of a new CEO increases the likelihood that individualized disclosures are made. Ownership concentration is positively associated with disclosure resistance. Other incentives for higher transparency such as a large, presumably high quality auditor, a listing in a global stock market segment, higher analyst coverage or the threat of takeovers are positively correlated with non-resistance. Additional analyses reveal that managerial incentives for non-disclosure may even prevail in firms with presumably high levels of governance quality. Taken together, these results provide insights into the particularities of disclosing sensitive, personal information. Moreover, we inform regulators on the potential cost and benefits of opt-out regimes as opposed to strict, unconditional disclosure regulation.

Competing Accounting Treatments for Emission Rights: A Capital Market Perspective

This study provides comparative tests for the decision usefulness of four accounting alternatives for emission rights. In current accounting practice, cost-based net approaches as well as cost- and market-based gross approaches coexist. Modelling the available accounting treatments as reporting alternatives for a sample of the major polluters within the EU ETS, we present empirical evidence on their suitability in a market valuation setting. We find that the cost-based net approach provides additional information while gross methods, even the full market-based disclosures, do not. We thus show that an increase in reporting complexity does not always yield superior information con-tent. Our results contribute to discussions of the economic impact of emission trading and to appropriate accounting treatments of such schemes.

Conditional Conservatism, Debt Markets and Financial Structure: Further Evidence from the United Kingdom

Conditional conservatism has caused a controversy in recent literature in regards to whether it is rather driven by reporting demands originating from debt or equity markets. Extending the work of Ball/Shivakumar (2005), who found public companies to report conditionally more conservative than private ones, our paper additionally differentiates between three subsamples of public firms (equity and/or bonds listed) and, moreover, also between different financial structures. Comparing the magnitude of conditional conservatism across the different subsamples indicates that the demands for conditional conservatism seem to be similar in all public markets implying that a demand for conditional conservatism emanates to the same extent in bond markets even when no equity is listed. Moreover, we show that the extent of conditional conservatism increases (decreases) when firms with only listed equity display comparatively higher (lower) debt (equity) ratios. We interpret these findings as strong demands for conservatism originating from public and private debt markets, but, to some degree, also from equity markets. Surprisingly, we also find that private firms with higher (lower) equity (debt) ratios report more conservative than those with lower equity ratios pointing to structurally different reporting demands emanating from public and private markets. Our findings contribute to the discussion which reporting demands drive conservatism.