We provide empirical evidence that managers smooth earnings using discretionary R&D spending (i.e., real smoothing) when managerial compensation packages contain high risk-taking incentives. Specifically, we find that real smoothing is related to both the sensitivity of executive wealth to a...

This paper investigates whether and how Japanese firms use management earnings forecasts as a performance target for determining executive cash compensation. Consistent with the implications of the agency theory, we find that the sensitivity of executive cash compensation varies with the extent...

What informational properties of earnings are demanded by compensation contracting for performance measurement? The answer to this question has important implications for accounting standard setting. While some expect conditional conservatism to be a desirable feature that helps to alleviate...

Equity-based compensation causes increases in firms' share count and dilutes Earnings Per Share (EPS), which provides firms with an incentive to raise EPS using either share buybacks or earnings management. We employ a regression discontinuity framework to provide evidence of a causal link...