Earnings management and CEO cash compensation

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Using firms' cash compensation data, we examine the empirical relationship between earnings management and the weight placed on accounting performance measure in compensation. Our results indicate that the weight on accounting income in compensation decreases as the tendency of using discretionary accruals increases. A plausible interpretation of the findings is that compensation committees view the managers' use of discretionary accruals as providing crude measure of managers' and firm performance and they actively intervene to reduce the ability of executives to manipulate compensation by lowering the weight on accounting performance.
Publisher
The International Journal of Finance
Issue Date
2004-12
Language
English
Citation

The International Journal of Finance, v.16, no.4, pp.3224 - 3245

ISSN
1041-2743
URI
http://hdl.handle.net/10203/244398
Appears in Collection
MT-Journal Papers(저널논문)
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