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The Impact of Executive Pay and Executive Power on Earnings Management in India

Soumya Sharma et al.

NMIMS Management Review2025https://doi.org/10.1177/09711023251323399article
ABDC C
Weight
0.50

What the paper says

Purpose: To examine whether, and the extent to which, executive pay and executive power impact earnings management (EM) behaviour in India. Design/Methodology/Approach: The study applies the modified version of Jones’s (1991, Journal of Accounting Research , 29 (2), 193–228) model propounded by Dechow et al. (1995, The Accounting Review , 70 (2), 193–225) to measure the proxy for accruals-based EM and the Roychowdhury’s (2006, Journal of Accounting and Economics , 42 (3), 335–370) model to measure real EM in 980 listed companies in India during the period 2008–2022. Findings: The study reveals a statistically significant positive relationship between executive pay and EM and between executive power and EM. Further, a statistically significant negative relationship between EM and the interaction effect of executive pay and executive power suggests that well-paid, powerful executives on the board of directors are less likely to pursue EM activity in India. Originality/Value: There are limited studies that utilise a large balanced panel data set of listed companies covering majority of the non-finance industries in the Indian economy over a span of 15 years. The study highlights the significant explanatory power for real EM in comparison to accruals-based EM in India. Implications: The positive link between executive pay and EM suggests that the designing of compensation packages is linked to long-term value creation rather than short-term earnings. The influence of executive power highlights the importance of board independence and balanced CEO power. The negative interaction effect suggests alignment of executive pay and power with long-term company goals to mitigate earnings manipulation.

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https://doi.org/https://doi.org/10.1177/09711023251323399

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@article{soumya2025,
  title        = {{The Impact of Executive Pay and Executive Power on Earnings Management in India}},
  author       = {Soumya Sharma et al.},
  journal      = {NMIMS Management Review},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1177/09711023251323399},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.