Employment capital, board control, and the problem of misleading disclosures *.

Washington State University Table 1 Correlations and Descriptive Statistics Variable Mean S.D. 1 1. Restatement ([double dagger]) .50 .50 1.00 2. Assets (In) 5.12 1.80 .01 3. Employees (In) .25 1.79 .03 4. Duality ([double dagger]) .72 .45 -.12 5. Cont. comp. 1.17 1.38 .21 ** 6. ROA -2.65 29.65 .04 7. Z score 7.63 16.16 -.10 8. Mkt. return 35.32 233.42 .17 * 9. CEO tenure 8.46 8.36 -.16 ([dagger]) 10. CEO own. pct. 8.79 16.51 .12 11. Board own. pct. 5.07 9.11 .02 12. Board tenure 7.39 5.18 -.31 *** 13. Outsider pct. .60 .21 .07 Variable 2 3 1. Restatement ([double dagger]) 2. Assets (In) 1.00 3. Employees (In) .82 *** 1.00 4. Duality ([double dagger]) .15 ([dagger]) .12 5. Cont. comp. .18 * .11 6. ROA .33 *** .27 *** 7. Z score -.10 -.24 ** 8. Mkt. return -.05 .03 9. CEO tenure .10 .15 ([dagger]) 10. CEO own. pct. -.36 *** -.19 * 11. Board own. pct. -.24 ** -.29 *** 12. Board tenure .17 * .21 ** 13. Outsider pct. .23 ** .06 Variable 4 5 1. Restatement ([double dagger]) 2. Assets (In) 3. Employees (In) 4. Duality ([double dagger]) 1.00 5. Cont. comp. -.07 1.00 6. ROA -.04 .13 7. Z score -.13 .23 ** 8. Mkt. return -.12 -.07 9. CEO tenure .28 *** -.02 10. CEO own. pct. .16 * -.19 * 11. Board own. pct. -.0l -.13 12. Board tenure .11 -.09 13. Outsider pct. .08 .08 Variable 6 7 8 1. Restatement ([double dagger]) 2. Assets (In) 3. Employees (In) 4. Duality ([double dagger]) 5. Cont. comp. 6. ROA 1.00 7. Z score .15 ([dagger]) 1.00 8. Mkt. return .05 -.07 1.00 9. CEO tenure .15 ([dagger]) -.03 -.04 10. CEO own. pct. -.07 -.04 .01 11. Board own. pct. -.15 ([dagger]) .01 -.07 12. Board tenure .17 * -.04 .01 13. Outsider pct. -.01 -.06 -.09 Variable 9 10 1. Restatement ([double dagger]) 2. Assets (In) 3. Employees (In) 4. Duality ([double dagger]) 5. Cont. comp. 6. ROA 7. Z score 8. Mkt. return 9. CEO tenure 1.00 10. CEO own. pct. .08 1.00 11. Board own. pct. -.15 ([dagger]) -.04 12. Board tenure .50 *** .01 13. Outsider pct. -.07 -.09 Variable 11 12 13 1. Restatement ([double dagger]) 2. Assets (In) 3. Employees (In) 4. Duality ([double dagger]) 5. Cont. comp. 6. ROA 7. Z score 8. Mkt. return 9. CEO tenure 10. CEO own. pct. 11. Board own. pct. 1.00 12. Board tenure -.11 1.00 13. Outsider pct. .04 -.16 * 1.00 N = 140. ([double dagger]) = Coded 0 (no) or 1 (yes). ([dagger]) p < .10, * p < .05, ** p < .01, *** p < .001. Table 2 Results of Logistic Regression Analyses Variable Model l Model 2 Controls:

Assets (ln) -.121 .361

Employees (ln) .127 -.153

Duality ([double dagger]) -.486 -.752

Contingent comp. .362 .537 ** Independent Variables:

ROA .002

Z score -.029

Market return .011 **

CEO tenure .001

CEO own. pct. .037 *

Board own. pct. .022

Board tenure -.173 **

Outside pct. -.441 Interactions:

Bd. ten. x Mkt. ret.

Bd. ten. x CEO own. pct. Curvilinear relationship:

CEO own. pct. squared Constant .520 -.762 -2LL 184.137 139.239 [DELTA]-2LL 44.898 *** Hit rate .597 .774 Nagelkerke [R.sup.2] .080 .384

[DELTA] Nagelkerke [R.sup.2] .304

F statistic 12.769 *** Variable Model 3 Model 4 Controls:

Assets (ln) .341 .323

Employees (ln) -.031 -.139

Duality ([double dagger]) -.815 -.520

Contingent comp. .542 ** .595 ** Independent Variables:

ROA .003 .001

Z score -.029 -.031

Market return -.007 .012

CEO tenure -.016 .015

CEO own. pct. .038 -.087

Board own. pct. .021 .031

Board tenure -.263 ** -.194 **

Outside pct. -.557 -1.119 Interactions:

Bd. ten. x Mkt. ret. .003 **

Bd. ten. x CEO own. pct. -.002 Curvilinear relationship:

CEO own. pct. squared .003 * Constant -.013 -.037 -2LL 127.459 135.214 [DELTA]-2LL 11.780 ** 4.085 * Hit rate .797 .752 Nagelkerke [R.sup.2] .464 .412

[DELTA] Nagelkerke [R.sup.2] .080 .028

F statistic 15.299 *** 9.857 ** N = 140. DV = 0 if no restatement, 1 if restatement. All coefficients are unstandardized. ([dagger]) p <. 10, * p <.05, ** p < .01, *** p < .001. ([double dagger]) = Coded 0 (no) or 1 (yes). Hierarchical procedure compares each of Model 3 and 4 with Model 2 (main effects).