Impact of Clawback Provisions on Investment

This assignment analyzes an article investigating the influence of clawback provisions on investment behavior and information processing. The research explores how managers' decision-making and risk assessment are impacted by the presence or absence of clawback clauses in their compensation contracts. Key findings reveal that clawback provisions can alter risk-taking tendencies, with managers potentially becoming more cautious when facing potential losses. The assignment also delves into the theoretical underpinnings of the study, highlighting the experimental research design and its implications for understanding real-world investment practices.

Running head: COMPLEMENTING REVIEW
Complementing Review
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Summary of the Article 1...........................................................................................................3
Description of the chosen article............................................................................................3
Purpose of the research..........................................................................................................3
Research Questions................................................................................................................3
Key assumptions....................................................................................................................3
Theory Used...........................................................................................................................4
Key Findings..........................................................................................................................4
Conclusion..............................................................................................................................4
Reflection of Article 1................................................................................................................4
Lessons Learned.....................................................................................................................4
Positive Aspects of the Research...........................................................................................4
Questions that are still unanswered........................................................................................5
Summary of the Article 2...........................................................................................................6
Description of the chosen article............................................................................................6
Purpose of the research..........................................................................................................6
Research Questions................................................................................................................6
Key assumptions....................................................................................................................6
Theory Used...........................................................................................................................7
Key Findings..........................................................................................................................7
Conclusion..............................................................................................................................7
Reflection of Article 2................................................................................................................7

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Lessons Learned.....................................................................................................................7
Positive Aspects of the Research...........................................................................................8
Questions that are still unanswered........................................................................................8
References..................................................................................................................................9

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Summary of the Article 1
Description of the chosen article
The article is based on the adoption of management accounting innovations as per
organisational culture and compatibility along with the outcomes.
Purpose of the research
The present study aims to contribute in the understanding and adoption of
management accounting innovations at firm level. The integration of the insights is taken
from assimilating the facts from newly introduced theoretical methods with the goal
explaining the dynamism in the interplay between the organizational culture and motivation
for the adoption of the diffusion process (Ax & Greve, 2017).
Research Questions
The first hypothesis aims to suggest whether the early adopters of the innovation are
well-matched firms and whether with diffusion progress the compatible adopter’s declines.
The second hypothesis has shown positive interactions with the perceived occasion of
attaining the gains based on the decision to adopt innovation. The third hypothesis has
highlighted on the incompatibility of the positive interactions along with the strength of
competition for influencing the decision to adopt innovation process.
Key assumptions
The main assumption of the management shows that the early adopters are driven by
the technical considerations and later adoptions for engaging in anxiety-driven pressures to
conform the same. The other assumptions of the study have presumed the shared values and
beliefs which persists among the organizational members.

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Theory Used
The study identified to explore the diffusion of the “BSC across Swedish
manufacturing business units”. The intellectual collection of the sample is taken from 300
firms which has been randomly drawn with the PARAD database.
Key Findings
The study has found that the compatibility of the firms is positively related to the
early adoption of the diffusion process and the incompatibility is related to the late adoption.
In addition to this, the results of the study show that major portion of the firm never adopted
to BSC during a study period of 18 years.
Conclusion
The paper has contributed to the literature which has been able to identify the
acceptance of innovations at the firm level of analysis.
Reflection of Article 1
Lessons Learned
The study has helped me to identify and test the compatibility between organizational
philosophy along with the “values and beliefs embedded in the early innovation” adoption
and perspective of firm’s belief on the same.
Positive Aspects of the Research
The positive empirical evidences are evident with “compatibility and innovation
adoption” rates but observes for the influence of the compatibility decline and unfolding of
diffusion overtime. The study has been able to make a positive assessment on compatibility
as a factor explanation of early versus late innovation adoption.

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Questions that are still unanswered
The research has focused on the results based on “manufacturing firms in Sweden”.
However, previous research studies have focused on competition and industry structure and
found that the results may differ as per industry structure and country. There is no knowledge
on how the industry and country factors may affect the findings of the study.

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Summary of the Article 2
Description of the chosen article
The second article shows the impact of clawback of the provisions on the investment
behaviour and information processing.
Purpose of the research
The research aims to find the positive and negative trends which may affect the
commercial success from the investment. The study has also identified the accountability
motivated with the reasoning process.
Research Questions
The first hypothesis considers the investment decisions which affects the size of a loss
and discern whether compensation contracts include the clawback provisions when they do
not. The second hypothesis for the situation infers a situation whether managers are able to
issue a more positive assessment for the success factors of a risky investment during a
situation of loss. The hypothesis has also discerned whether the compensation is included in
the clawback provision when it does not. The last hypothesis assesses whether the manager
will underestimate the riskiness in the investment when compensation is included in a
clawback provision rather than when it is not (Hirsch, Reichert & Sohn, 2017).
Key assumptions
The experiment has employed 2x2 between subject design to depict the type of
incentive system and the world financial position of the company which exists between the
subject factors. The participants of the study have assumed a role of senior product manager
with the company producing industrial size printers.

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Theory Used
The main theory is implemented with the use of experimental research model to
signify the incentive system which exists between clawback versus bonus only. The study has
further considered financial position with loss position versus mixed position. The online
study was conducted with the use of “Qualtrics” survey software.
Key Findings
The findings of the study are consistent with motivated reasoning process and
differences which exists in information processing lending to the support of both hypothesis 2
and hypothesis 3 selected for the study. The overall findings have showed the effectiveness of
clawback provision composition implementation and they indicated that participants have
assumed a state of mind in which the differences in compensation is consistent with
compensation manipulation. The results of the study further indicated that there is a shift in
risk-taking phenomena when clawback provisions are introduced.
Conclusion
The outcome of the study has indicated a shift in risk-taking tendency due to mixed
position of clawback to reduce the propensity of managers to invest in risky investment and
the impacts of extraneous perils such as recession and financial crisis.
Reflection of Article 2
Lessons Learned
The study has given me the opportunity to learn about clawback provisions which has
been called for an extension post financial crisis in 2008. The overall learning has given me
the opportunity to propose an investment decision in terms of the effect of clawback
provisions prevailing in the company.

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Positive Aspects of the Research
There has been a dissipation of positive trend with 5.39 means standard deviation
compared to 4.39 for a dissipation of negative trend. The expected economic theory has
predicted for a positive correlation between higher investment which leads to high limit of
perceived risk.
Questions that are still unanswered
Some of the main questions still remain unanswered which are related to design
choices and reduction in complexity compared to decisions made in real life. For instance, in
the given case the participants did not receive the outcomes based on compensation.

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References
Ax, C., & Greve, J. (2017). Adoption of management accounting innovations: Organizational
culture compatibility and perceived outcomes. Management Accounting Research, 34,
59-74.
Hirsch, B., Reichert, B. E., & Sohn, M. (2017). The impact of clawback provisions on
information processing and investment behaviour. Management Accounting
Research, 37, 1-11.