IFRS and the Use of Accounting-Based Performance Measures in Executive Pay

Georgios Voulgaris, Konstantinos Stathopoulos and Martin Walker

The International Journal of Accounting, 2014, vol. 49, issue 4, 479-514

Abstract: We examine the effect of IFRS (International Financial Reporting Standards) on the type of performance measures firms use to evaluate and reward their managers. We show that post-IFRS firms decrease the weight of Earnings-per-Share (EPS)-based performance measures in CEO pay contracts. We argue that IFRS add “noise” to accounting numbers which, based on optimal contracting theory, makes reported earnings less useful for evaluating managerial performance. Our findings suggest that while under IFRS accounting earnings could be more informative for valuation purposes, this might be achieved at the expense of other purposes that accounting serves, i.e., stewardship/performance contracting.

Keywords: Optimal Contracting; IFRS; Performance measures; Executive pay; Fair value accounting (search for similar items in EconPapers)
JEL-codes: G34 M21 M41 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:49:y:2014:i:4:p:479-514

DOI: 10.1016/j.intacc.2014.10.001

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