Chief Financial Officers’ Short- and Long-term Incentive-based Compensation and Earnings Management

Sarowar Hossain and Gary S. Monroe

Australian Accounting Review, 2015, vol. 25, issue 3, 279-291

Abstract: type="main">

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.

Date: 2015
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