Managerial legal liability coverage, equity-based executive compensation, and earnings management
This study investigates how managers” compensation incentives, as measured by equity-based executive compensation and managerial legal liability coverage affect earnings management.The availability of compensation may encourage managers to adopt more aggressive accounting practices; however, the higher the legal liability managers face, the more it will reduce their willingness to engage in such risk-taking behavior.Once managers mitigate their personal legal liability through directors” and officers” (D&O) liability insurance, they may be more inclined to manipulate reported earnings.We use excess D&O liability insurance coverage as a proxy for managerial liability coverage and test a sample of listed firms in Taiwan where D&O liability insurance purchases are publicly disclosed.We find that managers whose compensation is equity-based are more likely to adopt an opportunistic accounting strategy when they are covered by relatively high levels of D&O liability insurance; this suggests that the primary determination of earnings management is the joint effect of an increase in managers” compensation incentives and a decrease in their legal liability.
Equity-based compensation Directors” and officers” (D&O) liability insurance coverage Earnings management
Hsinyi Chi Tzu-Ching Weng Chun Ho Chen Yun Sheng Hsu
Department of Accounting National ChungHsing University Department of Accounting FengChia University
国内会议
中国会计学会财务管理专业委员会2012年学术年会暨第十八届中国财务学年会
南宁
英文
567-596
2012-11-17（万方平台首次上网日期，不代表论文的发表时间）