The impacts of accrual-based and real earnings management on executive compensation: evidence from Chinese public firms in the private sector

Fangzhao Zhou, Lei Wang, Zenan Zhang and Yunbi An

Asia-Pacific Journal of Accounting & Economics, 2018, vol. 25, issue 1-2, 128-144

Abstract: This paper investigates whether high CFO or CEO compensation follows earnings management practices in Chinese public firms in the private sector. We find that while accrual-based earnings management does not impact executive compensation, real earnings management leads to high executive compensation. In addition, the effect of real earnings management is particularly strong for CEO pay, consistent with the notion that CEO pressure is the key driver of earnings management. Moreover, we find that this association is more pronounced for firms with a powerful CEO as well as for firms with a large wedge between control and cash flow rights.

Date: 2018
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DOI: 10.1080/16081625.2016.1222296

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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