Journal of Accounting and Economics Vol. 26 No. 1-3 1999
Earnings-based bonus plans and earnings management by business-unit managers
Abstract
This study tests the bonus-maximization hypothesis that managers make discretionary accrual decisions to maximize their short-term bonuses. By using the management and financial reporting database of a large conglomerate, we extend previous investigations in two ways. First, the analysis is conducted using business unit-level data, which reduces the aggregation problem that is likely to arise using firm-level data. Second, managers in this setting are paid bonuses based solely on business unit earnings. The potentially confounding effects of long-term performance and stock-based incentive compensation are thus absent. These innovations yield robust evidence consistent with Healy (1985).
- DOI
- 10.1016/s0165-4101(98)00037-8
- Volume
- 26
- Issue
- 1-3
- Pages
- 113-142
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref