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CEO Incentives and Earnings Management

29 Pages Posted: 2 Feb 2005  

Daniel Bergstresser

Harvard Business School

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

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

Daniel B. Bergstresser

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Thomas Philippon (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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