CEO Incentives and Earnings Management

Bergstresser, Daniel; Philippon, Thomas

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CEO Incentives and Earnings Management

Journal of Financial Economics, Forthcoming

HBS Finance Working Paper No. 640585

29 Pages Posted: 2 Feb 2005

See all articles by Daniel Bergstresser

Thomas Philippon

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

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Abstract

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

Bergstresser, Daniel and Philippon, Thomas, CEO Incentives and Earnings Management. Journal of Financial Economics, Forthcoming, HBS Finance Working Paper No. 640585, Available at SSRN: https://ssrn.com/abstract=640585