CEO Incentives and Earnings Management
29 Pages Posted: 2 Feb 2005
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.
Keywords: Earnings management, Stock options, CEO compensation
JEL Classification: G34, G32, M41, M43, J33
Suggested Citation: Suggested Citation