has a negative relation and that bonus and stock-based compensation have a positive relation with discretionary accruals as a tool for earnings management. To test this, accrual and compensation data from FTSE listed firms is used. The accrual approach will be used in measuring earnings management and the relative size of the compensation types will be used to measure the compensation variables. The results from this research show that fixed salary has a positive relationship with discretionary accruals. For bonus compensation no linear relationship with discretionary accruals is found and for stock-based compensation a negative relationship with discretionary accruals is found. Moreover, this research has proven that low have significant higher mean scores of discretionary equity incentive CEO’s accruals than high equity incentive the results seem to oppose the CEO’s. Therefore, results of studies from Bergstresser and Philippon (2006), Cheng and Warfield (2005) and Gao and Shrieves (2002) who all found evidence that high equity incentive more in earnings management (through the use of CEO’s engage discretionary accruals) than low equity incentive CEO’s. Table of Contents
has a negative relation and that bonus and stock-based compensation have a positive relation with discretionary accruals as a tool for earnings management. To test this, accrual and compensation data from FTSE listed firms is used. The accrual approach will be used in measuring earnings management and the relative size of the compensation types will be used to measure the compensation variables. The results from this research show that fixed salary has a positive relationship with discretionary accruals. For bonus compensation no linear relationship with discretionary accruals is found and for stock-based compensation a negative relationship with discretionary accruals is found. Moreover, this research has proven that low equity incentive CEO’s have significant higher mean scores of discretionary accruals than high equity incentive CEO’s. Therefore, the results seem to oppose the results of studies from Bergstresser and Philippon (2006), Cheng and Warfield (2005) and Gao and Shrieves (2002) who all found evidence that high equity incentive CEO’s engage more in earnings management (through the use of discretionary accruals) than low equity incentive CEO’s. Table of Contents