| Summary: | 碩士 === 國立臺灣大學 === 會計學研究所 === 91 === Earnings management is one type of fraudulent financial reporting scheme where management’s desire to meet specific objectives can become a substitute for accurate disclosure. A general problem in large firms stems from the separation of ownership and control. In the 1990s, Companies use stock options to align the interests of shareholders and managers, and encourage managers to take appropriate risks. Thus, stock options now constitute the majority of managers’ compensation in many firms. However, executives may have growing temptation to want to “dress up” earnings numbers to maximize their wealth.
This paper discusses the banks executive compensation scheme and its impact on executives’ earnings management decision. In our research, discretionary loan loss provision is used as a proxy for earnings management. Using different specifications, we find evidence contrary to prior studies. The impact of compensation on incentives of bank executives to manage earnings is different from the non-bank firms. We also document the reason for the conflicting results in these effects observed in prior studies. Additionally, we find that earnings management intensity to bank’s executives, as measured by absolute value of discretionary provisions scaled by asset size, is not significantly related to compensation package design.
|
|---|
