Executive compensation and earnings management: Empirical evidence from Japan |
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Authors: | Akinobu Shuto |
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Affiliation: | Faculty of Commerce, Senshu University, 2-1-1, Higashimita, Tamaku, Kawasaki 214-8580, Japan |
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Abstract: | This study investigates the relation between discretionary accounting choices and executive compensation in Japanese firms. The results show that the use of discretionary accruals increases executive compensation. The analyses also show that firm managers receiving no bonus adopt income-decreasing accruals and extraordinary items. In particular, evidence shows that negative extraordinary items are strongly associated with no bonus payment. Finally, the research indicates that the association between discretionary accruals and executive bonus varies depending upon the circumstances of the firm. This study contributes to the literature on earnings management from an international comparative perspective since most previous studies on earnings management and executive compensation have focused on U.S. firms. |
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Keywords: | Executive compensation Earnings management Discretionary accruals Extraordinary items Big bath Income smoothing |
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