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Does Executive Compensation Affect Accounting Irregularities? Evidence From Listed Firms in Indonesia

Author

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  • Gatot Soepriyanto
  • Engkos Achmad Kuncoro
  • Arfian Erma Zudana
  • Livia Averine

Abstract

This research examined the association between executive compensation and accounting irregularities in Indonesia. Employing 1,100 firm-year observations during 2014 to 2017 period, we found that executive compensation is positively associated with accounting irregularities. This result is robust after we mitigated a serial order correlation of accounting irregularities and a self-selection bias using propensity score matching. We also discovered a positive relationship after considering alternative measures of accounting irregularities. Furthermore, we documented that the positive association between executive compensation and accounting irregularities is stronger for firms with higher board independence. Our findings provide important insights for regulators and Asian emerging market regulators who are considering promoting equity incentives for listed firms.

Suggested Citation

  • Gatot Soepriyanto & Engkos Achmad Kuncoro & Arfian Erma Zudana & Livia Averine, 2022. "Does Executive Compensation Affect Accounting Irregularities? Evidence From Listed Firms in Indonesia," SAGE Open, , vol. 12(3), pages 21582440221, July.
    • Handle: RePEc:sae:sagope:v:12:y:2022:i:3:p:21582440221111109
    DOI: 10.1177/21582440221111109
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    References listed on IDEAS

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    Cited by:

    1. Mark E. Lokanan & Prerna Sharma, 2023. "Two Decades of Accounting Fraud Research: The Missing Meso-Level Analysis," SAGE Open, , vol. 13(3), pages 21582440231, September.

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