Is There a Link between Executive Equity Incentives and Accounting Fraud?

Posted: 15 Sep 2005

See all articles by Merle Erickson

Merle Erickson

University of Chicago - Booth School of Business

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Edward L. Maydew

University of North Carolina at Chapel Hill

Abstract

We compare executive equity incentives of firms accused of accounting fraud by the Securities and Exchange Commission (SEC) during the period 1996-2003 to two samples of firms not accused of fraud. We measure equity incentives in a variety of ways and employ a battery of empirical tests. We find no consistent evidence that executive equity incentives are associated with fraud. These results stand in contrast to assertions by policy makers that incentives from stock-based compensation and the resulting equity holdings increase the likelihood of accounting fraud.

JEL Classification: M41, M43, M49, J33, G34, G32

Suggested Citation

Erickson, Merle and Hanlon, Michelle and Maydew, Edward L., Is There a Link between Executive Equity Incentives and Accounting Fraud?. Journal of Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=800544

Merle Erickson

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-0716 (Phone)
773-702-0458 (Fax)

Michelle Hanlon (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-668
Cambridge, MA 02142
United States
617-253-9849 (Phone)

Edward L. Maydew

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

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