Abstract
Studies examining managerial accounting decisions postulate that executives rewarded by earnings-based bonuses select accounting procedures that increase their compensation. The empirical results of these studies are conflicting. This paper analyzes the format of typical bonus contracts, providing a more complete characterization of their accounting incentive effects than earlier studies. The test results suggest that (1) accrual policies of managers are related to income-reporting incentives of their bonus contracts, and (2) changes in accounting procedures by managers are associated with adoption or modification of their bonus plan.
Keywords
AccrualIncentiveAccountingEarningsCompensation (psychology)Accounting information systemEarnings managementBusinessManagement accountingEconomicsActuarial scienceMicroeconomicsPsychology
Affiliated Institutions
Related Publications
Executive Motivations, Earnings, and Consequent Equity Performance
In this paper the financial incentives of executives are analyzed, theoretically and econometrically, with particular emphasis on the relationship between executive motivations ...
Large Shareholders as Monitors: Is There a Trade‐Off between Liquidity and Control?
This paper analyzes the incentives of large shareholders to monitor public corporations. We investigate the hypothesis that a liquid stock market reduces large shareholders' inc...
Information Technology, Incentives, and the Optimal Number of Suppliers
:Buyers are transfonning their relationships with suppliers. For example, instead of playing off dozens or even hundreds of competing suppliers against one another, many finns a...
Private Information, Trading Volume, and Stock-Return Variances
New evidence is provided on the determinants of stock-return variances. First, when the Tokyo Stock Exchange is open on Saturday, the weekend variance increases; weekly variance...
The Role of Value Congruity in Intraorganizational Power
To understand better the differences in power between subunits, this paper examines the relationship between perceived departmental power and the extent to which departments app...
Publication Info
- Year
- 2011
- Type
- book
- Citations
- 2739
- Access
- Closed
External Links
Citation Metrics
2739
OpenAlex
Cite This
Paul M. Healy
(2011).
The effects of bonus schemes on accounting decisions.
DSpace@MIT (Massachusetts Institute of Technology)
.