Chief Financial Officers’ Short — And Long-Term Incentives Based Compensation and Earnings Management.
Australian Accounting Review (Forthcoming)
Posted: 3 Sep 2015
Date Written: September 2, 2015
This study examines the associations between the Chief Financial Officer’s (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. The results provide evidence that the earnings management behaviour of CFOs is associated with the type of CFO compensation.
Keywords: Chief Financial Officer, discretionary current and non-current accruals, short and long-term compensation, bonus, shares and options.
JEL Classification: M12, M42
Suggested Citation: Suggested Citation