The Relationship between Executive Cash Compensation and Corporate Governance, Income Smoothing, Discretionary Accruals, and Firm Value

Document Type : Original Article


1 Department of Accounting, Allameh Naeini Institute of Higher Education, Naein, Iran

2 Department of Sama Technical and Vocational Training College, Khorasgan Branch, Islamic Azad

3 Department of Accounting, Allameh Naeini Institute of Higher Education, Naein, Iran.


The disclosure of executive compensation arrangements in annual reports would allow investors and other interested parties to make informed judgments about manager motivation and commitment to maximize shareholder wealth. This study examines the relationship between Executive cash compensation, corporate governance, Income smoothing, Discretionary accruals, and firm value in companies listed on the Tehran Stock Exchange. The statistical population of this study is Iran-Tehran Stock Exchange during 2013-2017. The results showed that Corporate Governance has a Negative and Significant Impact on Executive cash compensation.  Executive cash compensation does not significantly negatively affect income smoothing, and Executive cash compensation does not have a positive and significant effect on Discretionary accruals. And, Executive cash compensation has a significant impact on decreasing Firm value.


Ahmad, D. (2013). Executive bonus target ratcheting: Evidence from the new executive compensation disclosure rules. School of accountancy. the Chinese University of Hong Kong. Contemporary Accounting Research, Forthcoming, 34(4), 1843-1879.
Armstrong P, Segal N, Davis B. 2006. Corporate governance in South Africa. In Handbook on International Corporate Governance, Mallin CA (ed.). Edward Elgar Publishing: London.
Bebchuk, L. A., & Fried, J. A. (2003). Executive compensation as an agency problem. Journal of Economic Perspectives, 17(3), 71-92.
Chao, Y., Myers, J., Myers, L., & Omer, T. (2017). Company reputation and the cost of equity capital. Review of Accounting Studies, 20(1), 42–81.
Davila, A., & Penalva, F., (2006). Governance structure and the weighting of performance measures in CEO compensation. Review of Accounting Studies, 11, 463–493.
Fama, E., & French, K., (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3–56.
Ghosh, A., (2006). Determination of executive compensation in an emerging economy: evidence from India. Emerging Markets Finance and Trade, 42, 66–90.
Gombola, M.J., Ho, A.Y-F., & Huang, C.C. (2016). The effect of leverage and liquidity on earnings and capital management: Evidence from U.S. Commercial banks. International Review of Economics and Finance, 43(200), 35–58.
Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of accounting and public policy, 24(5), 391-430.
Iatridis, G. E. (2018). Accounting discretion and executive cash compensation: An empirical investigation of corporate governance, credit ratings and firm value. Journal of International Financial Markets, Institutions and Money, 55, 29-49.
Kannan, Y., Skantz, T., & Higgs, J. (2014). The impact of CEO and CFO equity incentives on audit scope and perceived risks as revealed through audit fees. Auditing: A Journal of Practice & Theory, 33(2), 111–139.
King Committee. 2002. King Reports on Corporate Governance for South Africa. Institute of Directors: Johannesburg.
Lambert R A and Larcker D F (1985) ‘Executive Compensation, Corporate Decision-Making and Shareholder Wealth: A Review of the Evidence’ Corporate Finance Journal 2 No.1
Lazzem, S., & Faouzi, J. (2017). The impact of leverage on accrual-based earnings management: the case of listed French firms. Research in International Business and Finance, 44, 350-358.
Mangena M, Chamisa E. 2008. Corporate governance and incidences of listings suspension by the JSE Securities Exchange of South Africa: empirical analysis. International Journal of Accounting 43: 28–44.
Muhammad Zulfiqar (2019) Ceo Compensation And Firm Innovation; Interaction Effect Of Ownership Structure
Murphy K. J. (1998) ‘Executive Compensation’ Handbook for labour economics, Volume 3, North Holland. Ozkan N. (2007) CEO ‘Compensation and Firm Performance: An Empirical Investigation of UK Panel Data’ Journal of Economic Literature
Okeahalam CC. 2004. Corporate governance and disclosure in Africa: issues and challenges. Journal of Financial Regulation and Compliance 12: 359–370.
Ozkan N. (2007) CEO ‘Compensation and Firm Performance: An Empirical Investigation of UK Panel Data’ Journal of Economic Literature
Rossouw GJ, van der Watt A, Malan DP. 2002. Corporate governance in South Africa. Journal of Business Ethics 37: 289–302.