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Chief Financial Officers’ Short‐ and Long‐term Incentive‐based Compensation and Earnings Management
Author(s) -
Hossain Sarowar,
Monroe Gary S.
Publication year - 2015
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/auar.12059
Subject(s) - accrual , earnings management , incentive , compensation (psychology) , business , accounting , term (time) , cash , earnings , enterprise value , value (mathematics) , finance , actuarial science , economics , psychology , microeconomics , statistics , mathematics , physics , quantum mechanics , psychoanalysis
This study examines the association between chief financial officers’ (CFOs) short‐ and long‐term compensation and discretionary current and non‐current accruals. The CFO's cash bonus is used as a measure of short‐term incentives and shares plus options is used as a measure of long‐term incentives. The results show a significant and positive association between CFOs’ short‐term compensation and the absolute value of discretionary current accruals. The results also show a significant and positive association between CFOs’ long‐term compensation and the absolute value of discretionary non‐current accruals. STUDY provides evidence that the earnings management behaviour of CFOs is associated with type of CFO compensation.