IFRS and the Use of Accounting-Based Performance Measures in Executive Pay

Georgios Voulgaris, Konstantinos Stathopoulos, Martin Walker

Research output: Contribution to journalArticleScientificpeer-review

14 Citations (Scopus)

Abstract

We examine the effect of IFRS (International Financial Reporting Standards) on the type of performance measures firms use to evaluate and reward their managers. We show that post-IFRS firms decrease the weight of Earnings-per-Share (EPS)-based performance measures in CEO pay contracts. We argue that IFRS add "noise" to accounting numbers which, based on optimal contracting theory, makes reported earnings less useful for evaluating managerial performance. Our findings suggest that while under IFRS accounting earnings could be more informative for valuation purposes, this might be achieved at the expense of other purposes that accounting serves, i.e., stewardship/performance contracting.
Original languageEnglish
Peer-reviewed scientific journalThe International Journal of Accounting
Volume49
Issue number4
Pages (from-to)479-514
Number of pages36
ISSN1094-4060
DOIs
Publication statusPublished - 2014
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management

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