• norsk
    • English
  • English 
    • norsk
    • English
  • Login
View Item 
  •   Home
  • Norges Handelshøyskole
  • Thesis
  • Master Thesis
  • View Item
  •   Home
  • Norges Handelshøyskole
  • Thesis
  • Master Thesis
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Effort and Honesty: Compensation Contracts in the Presence of Earnings Manipulation

Buhagen, André; Lervik, Sebastian
Master thesis
Thumbnail
View/Open
MasterThesis.PDF (465.2Kb)
URI
http://hdl.handle.net/11250/300126
Date
2015
Metadata
Show full item record
Collections
  • Master Thesis [3749]
Abstract
Compensating managers with incentive pay may motivate earnings manipulation.

In this thesis, we develop models that suggest more efficient compensation con-

tracts that incentivize managers to exert effort and report honestly. We analyze

the manager's incentive to manipulate the financial statement when the manager

is remunerated with short-term and long-term incentive pay and when we apply

different performance measures in the manager's compensation plan.

We find that short-term incentives motivates both effort and manipulation,

while long-term incentives induces effort, but not manipulation. Shifting incentives

towards relatively more long-term pay will reduce earnings manipulation while

maintaining incentives for effort. This is because it is not possible to in

ate long-

term compensation through opportunistically overstating accruals.

We also consider the manager's incentive to manipulate when the manager

faces incentive plans with different performance measures. We predict that there

will be less manipulation when the stock price is used as a performance measure

relative to when accounting earnings is used. The reason is that when the reported

earnings goes through the "filter" of the market participants, the value of a high

earnings report is discounted if the market believes that the report may be ma-

nipulated. This reduces the manager's benefit of manipulation. The consequence

is less manipulation when the stock price serves as the performance measure.

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit
 

 

Browse

ArchiveCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsDocument TypesJournalsThis CollectionBy Issue DateAuthorsTitlesSubjectsDocument TypesJournals

My Account

Login

Statistics

View Usage Statistics

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit