CEO Incentives and Earnings Management
Harvard Business School
New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)
Journal of Financial Economics, Forthcoming
HBS Finance Working Paper No. 640585
We provide evidence that the use of discretionary accruals to manipulate reported earnings is more pronounced at firms where the CEO's potential total compensation is more closely tied to the value of stock and option holdings. In addition, during years of high accruals, CEOs exercise unusually large amounts of options and CEOs and other insiders sell large quantities of shares.
Number of Pages in PDF File: 29
Keywords: Earnings management, Stock options, CEO compensation
JEL Classification: G34, G32, M41, M43, J33
Date posted: February 2, 2005
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