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CEO Pay Contracts and IFRS Reconciliations

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  • Georgios Voulgaris
  • Konstantinos Stathopoulos
  • Martin Walker

Abstract

We examine whether UK managers exploit the discretion provided in the UK GAAP to IFRS reconciliation process to manage earnings and whether this earnings management is associated with the structure of the managers' compensation contracts. We use a comprehensive data set of mainly hand-collected information from the firms' annual reports to provide evidence that, given the existence of an accounting-related vesting target in their pay schemes, CEOs use UK GAAP to IFRS reconciliations as an earnings management tool. We test our hypotheses under a number of different specifications, including a propensity score matching analysis. Our study contributes to the literature on the relation between earnings management and contractual incentives by focusing on a major structural change in accounting policies.

Suggested Citation

  • Georgios Voulgaris & Konstantinos Stathopoulos & Martin Walker, 2015. "CEO Pay Contracts and IFRS Reconciliations," European Accounting Review, Taylor & Francis Journals, vol. 24(1), pages 63-93, May.
    • Handle: RePEc:taf:euract:v:24:y:2015:i:1:p:63-93
    DOI: 10.1080/09638180.2014.894927
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    2. Vafeas, Nikos, 2017. "A Discussion on “IFRS Adoption and Stock Prices of Japanese Firms in Governance System Transition”," The International Journal of Accounting, Elsevier, vol. 52(4), pages 338-340.

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