Does Pay for Performance Reduce Earnings Management in France ?

Faten Lakhal, Nadia Lakhal, Sarra Cheurfi


The purpose of this paper is to examine the relationship between performance-based CEO compensation and earnings management by French managers. The French context is worthy to study given that firms are mostly held by families. CEO compensation in such firms is used as a tunneling mechanism to expropriate minority shareholders. Using a sample of French listed firms, we study how bonuses and CEO stock-option compensation affect earnings management practices. The findings show that managers are inclined to increase the variable part of their compensation by engaging in earnings management practices. Furthermore, we find that the amount of stock-options granted and exercised is positively associated to upward earnings management. These findings highlight manager’s opportunistic behaviour upon performance-based compensation which rather acts as a tunnelling mechanism than a corporate governance device.

Keywords: Stock-option, Bonus, Earnings management

Full Text: PDF
Download the IISTE publication guideline!

To list your conference here. Please contact the administrator of this platform.

Paper submission email:

ISSN (Paper)2222-1905 ISSN (Online)2222-2839

Please add our address "" into your email contact list.

This journal follows ISO 9001 management standard and licensed under a Creative Commons Attribution 3.0 License.

Copyright ©