Download or read book Executive Compensation and Earnings Management Under Moral Hazard written by Bo Sun and published by DIANE Publishing. This book was released on 2010-08 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Analyzes executive compensation in a setting where managers may take a costly action to manipulate corporate performance, and whether managers do so is stochastic. Examines how the opportunity to manipulate affects the optimal pay contract, and establishes necessary and sufficient conditions under which earnings management occurs. The author¿s model provides a set of implications on the role earnings management plays in driving the time-series and cross-sectional variation of executive compensation. In addition, the model's predictions regarding the changes of earnings management and executive pay in response to corporate governance legislation are consistent with empirical observations. Charts and tables.