Director incentives and earnings management  

Oleh:

Fu, Xudong ; Wan, Hong

Jenis: Article from Proceeding
Dalam koleksi: SIBR-Thammasat 2014 Conference on Interdisciplinary Business & Economics Research June 5th- 7th, 2014 di Emerald Hotel Bangkok, page 1-7.
Topik: Earnings management; Board of directors; Agency theory
Fulltext: b14-054.pdf (31.82KB)

Isi artikel

This paper investigates the relation between the proportion of director incentive compensation and earnings management. The findings show that firms with high directors’ incentive compensation are more likely to manage earnings, and this relation is more prominent when CEOs also receive high incentive. Furthermore, directors are more likely to exercise options in the year following excessive earnings management. The results are robust after controlling for self-selection bias for the firms that never pay directors options. Taken together, the evidence suggests that director incentive pay is more likely to align directors’ interest with the CEO’s, rather than to induce directors to act in the best interests of shareholders.

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