Research Paper on Executive Compensation and Contract-Driven Earnings Management

Research Paper from
Positive accounting
theories hypotheses
Executive compensation and contract-
driven earnings management

Table of contents
O Introduction
O Implications of agency theory
O Implications of positive accounting theory
O Bonus Plan Maximisation hypothesis
O Comparison of bonus plan hypothesis with
smoothing income hypothesis
O Equity based incentives
O Conceptual Knowledge
O Summary and practical contribution
O Conclusion
O References

Introduction
O The journal article relates to the study of executive
compensation and contract driven earnings
management in context of ASX listed companies.
O The article establish the link between agency
theory and positive accounting theory.
O Also the article provides a review of early executive
compensation effect, bonus plan maximization
hypothesis and equity-based hypothesis.
O Both the agency theory and positive accounting
theory explains the contract driven earnings
management in companies.

Implication of agency theory
O According to the agency
theory applied on
Australian companies, a
conflict of interest exists
between the managers of
the company and the
owners or shareholders.
O The management
compensation contract is
formulated by the owners
or shareholders so as to
make the management
perform their jobs in best
interest.