Title: Executive compensation structure and earnings management: evidence from Australian listed firms in the period of governance reform

Authors: Lan Sun

Addresses: College of Business, School of Business and Law, CQUniversity, Australia

Abstract: Executive compensation incentive is a key factor in inducing management of earnings in firms. Using a sample of 3,326 firm-year observations covering 2000 to 2006 fiscal years, the analysis shows that in Australia managers who receive higher salary tend to engage in less earnings management whereas managers who receive more incentive payments tend to engage in more earnings management. Moreover, Australian firms are committed to a gradual increase in the incentive payments in responding to the regulation reform known as CLERP 9. Subsequently, executives who receive more option grants are more likely to engage in earnings management. These findings will have implications for regulators who intend to improve both the efficacy of CEO compensation structure and financial reporting quality.

Keywords: earnings management; executive compensation; CLERP 9.

DOI: 10.1504/IJCG.2021.117208

International Journal of Corporate Governance, 2021 Vol.12 No.1, pp.1 - 35

Received: 23 Mar 2020
Accepted: 05 Feb 2021

Published online: 13 Aug 2021 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article