EARNINGS MANAGEMENT, CORPORATE GOVERNANCE AND CASH COMPENSATION: EVIDENCE FROM THE STOCK EXCANGE OF THAILAND

Abstract

Prior studies provide the evidence of using earnings management to increase the value of compensation. When managers and independent directors’ cash compensations are based on firm’s financial performance, it may lead those who pursue self-interest to give appearance of better performance through earnings management. This thesis examines the relation between earnings management, cash compensation and corporate governance. This thesis also examines the impact of cash compensation and corporate governance on adjusted firm financial performance with the effects of earnings management. This thesis further investigate whether market react to the change in cash compensation and discretionary accruals around the form 56-1 announcement date. Sample in this thesis is Thai listed firms in Stock Exchange of Thailand during 2005 to 2013. The results suggest the change in cash compensation of executive officers does not relate to earnings management. Increasing the cash compensation for executive officers improves the firm financial performance. The increasing in cash compensation of independent directors help reducing the use of earnings management.