Evidence on factors affecting the relationship between CEO stock option compensation and earnings management

Meek, Gary K.; Rao, Ramesh P.; Skousen, Christopher J.

doi:10.1108/14757700710778036

Cited by 74 publications

(64 citation statements)

References 71 publications

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“…However, Meek et al, (2007) argue that earnings management may be lower in large firms because, compared to other firms they have lower information asymmetry, stronger governance structures and stronger external monitoring. Also, empirical research documents that firms with financing needs and firms approaching debt covenant default triggers have higher levels of abnormal accruals, a higher incidence of GAAP violation and a higher likelihood of committing accounting fraud (Weber, 2006).…”

Section: Control Variablesmentioning

confidence: 99%

Audit Committee Effectiveness, Audit Quality and Earnings Management: An Empirical Study of the Listed Companies in Egypt

Soliman

Ragab²

2013

SSRN Journal

109

101

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The role of audit committees and audit quality in ensuring the quality of corporate financial reporting has come under considerable scrutiny due to recent high-profile earnings management cases in the world. The purpose of this paper is to examine the association between the audit committee effectiveness, audit quality and earnings management practices of more active 50 Egyptian companies listed on the Egyptian Stock Exchange of the nonfinancial sector during the period 2007-2010. After controlling for size, leverage and cash flow from operation activities, the results of univariate and multivariate analyses indicated that audit committees independence; experience of audit committee members; audit committee meetings; and audit quality have significant negative association with discretionary accruals as a proxy for earnings management. On the other hand, no significant relationship is found between audit committees size and the level of discretionary accruals. This paper is important because it offers useful information that is of great value to policy makers, academics and other stakeholders.

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Section: Control Variablesmentioning

confidence: 99%

Audit Committee Effectiveness, Audit Quality and Earnings Management: An Empirical Study of the Listed Companies in Egypt

Soliman

Ragab²

2013

SSRN Journal

109

101

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“…Indeed, some previous studies have found a positive relationship between company size and financial statement reliability (McMullen, 1996; Bédard et al, 2004). In addition, Meek et al (2007) argue that earnings management may be lower in large firms. In fact, compared to other companies, they have lower information asymmetry, stronger governance structures and stronger external monitoring.…”

Section: Control Variablesmentioning

confidence: 99%

The effect of the mandatory adoption of IAS/IFRS on earnings management: Empirical evidence from South Africa

Sellami

Slimi

2016

IJAES

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This research investigates the effect of mandatory transition of South African companies to IFRS on earnings management, essential attribute of accounting quality. Specifically, the study examines whether the mandatory adoption of IFRS is associated with reduction of earnings management and therefore, an improvement of accounting quality. In addition, the paper focuses on the effect of corporate governance factors on earnings management. Earnings management is assessed by the magnitude of discretionary accruals and accruals quality. The paper compares earnings management in the pre-mandatory IFRS adoption period; 2002-2004 and the post IFRS adoption period; 2010-2012. This study focuses on a sample of 276 firm-year observations, 46 firms drawn from the 413 South African listed companies. A regression model was applied to examine the relation between mandatory adoption of IFRS, corporate governance mechanisms and discretionary accruals controlling for other some factors explaining earnings management. Our findings show that mandatory adoption of IFRS by South African companies is associated with lower earnings management. This result suggests that mandatory transition to IFRS contribute to an improvement in the quality of accounting information. Furthermore, results show that the percentage of independent outside directors, the separation of roles of CEO and Chairman of the board and company size have significant influence on reducing discretionary accruals.

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“…Similarly, Cheng and Warfield (2005) report greater earnings management (defined as using discretionary accruals to meet or beat analyst forecast) in firms that rely more heavily on equity compensation. Furthermore, Meek et al (2007) find that the relationship between equity compensation and discretionary accruals can be moderated by firm size, growth and time period. Collectively, these studies provide evidence that equity compensation is positively associated with earnings management.…”

Section: Outside Director Compensation and Earnings Managementmentioning

confidence: 87%

Outside Director Equity Compensation And The Monitoring Of Management

McClain

2012

JABR

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Evidence on factors affecting the relationship between CEO stock option compensation and earnings management

Cited by 74 publications

References 71 publications

Audit Committee Effectiveness, Audit Quality and Earnings Management: An Empirical Study of the Listed Companies in Egypt

Audit Committee Effectiveness, Audit Quality and Earnings Management: An Empirical Study of the Listed Companies in Egypt

The effect of the mandatory adoption of IAS/IFRS on earnings management: Empirical evidence from South Africa

Outside Director Equity Compensation And The Monitoring Of Management

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