Manager Forfeiture, Reliability of Financial Reports, and Legal Mechanism
Institute of Business and Management
|關鍵字:||Sarbanes-Oxley法案;公司治理;法律機制;內部控制;審計品質;Sarbanes-Oxley Act of 2002;Corporate governance;Legal institution;Internal control;Audit quality|
The ”Sarbanes-Oxley Act of 2002” has imposed crime responsibility and liability rule on managers to prevent fraudulent financial reports. If an issuer is required to prepare an accounting restatement, the managers (the chief executive officer and chief financial officer) of the issuer shall reimburse the issuer for any bonus or other incentive-based or equity-based compensation received by that person from the issuer and any profits realized from the sale of securities of the issuer. We analyze the effectiveness of manager forfeiture from both corporate governance and social welfare perspectives. First of all, by using the game theoretical analysis to compare the effectiveness of corporate governance in manager-forfeit-allocate systems, we show that it will be better if the manager forfeiture is given to the CPAs. Next, comparing the social welfare in different manager-forfeit-sharing systems, we find that the regulation of manager forfeiture will not increase social welfare. Finally, this research proposes two manager-forfeit-allocation systems by considering the objectives of corporate governance and social welfare. There are two major contributions in this paper. First, the model of finding corporate governance indicators, comparing effectiveness, and evaluating the system from the social welfare perspective that we used in this paper may be a suitable framework for setting accounting and auditing standards in the future. Besides, when considering adapting the Sarbanes-Oxley Act of 2000 to our needs, Taiwan government may consider incorporating the proposal made in this paper.
Journal of Management and Systems