Title: CEO Compensation, Director Compensation, and Earnings Management: Does Compensation Structure Matter?
Abstract: This study investigates the relationship between excess director compensation and CEO
compensation and explores the effects of various abnormal CEO compensations on earnings
management. The results show that CEOs who receive abnormal cash and bonus
compensation resulting from excess director total compensation tend to increase firm profits
through earnings management, thereby reducing future performance. By contrast, CEOs who
receive abnormal incentive compensation, total compensation, and exercise-value of stock
options are less likely to manipulate earnings. These findings suggest that a proper director
and CEO compensation structure can reduce managerial earnings management and can
motivate CEO-director collaboration.
Key words: Compensation structure, CEO compensation, director compensation, earnings
management, incentive compensation
Publication Year: 2021
Publication Date: 2021-06-30
Language: en
Type: article
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