CEO Incentives and Earnings Management
28 Pages Posted: 3 Nov 2008
Date Written: December 2004
We provide evidence that the use of discretionary accruals to manipulate reportedearnings 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.
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