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Sun L. Executive Compensation and Contract-driven Earnings Management. 2012.
Please use this identifier to cite or link to this item: http://e-publications.une.edu.au/1959.11/11108
Executive Compensation and Contract-driven Earnings Management
Earnings management is found to be driven by different managerial incentives. Previous studies have identified that executive compensation contracts create incentives for earnings management. The agency theory and the positive accounting theory provide explanations for contract-driven earnings management. This study links the agency theory and the positive accounting theory and reviews the early executive compensation studies, bonus plan maximization hypothesis and equity-based compensation. The aim of this study is to shed light in explaining contractual incentives and provide useful information in understanding the contract-driven earnings management behaviour.