Variable remuneration before mandate time is the cause of opportunism of CEOs? Evidence of earnings management in Brazil

Abstract

This research verified the influence of variable remuneration on the relationship between CEOs term time and earnings management practices, as well as the mitigating effect generated by corporate governance mechanisms. The sample comprised 195 Brazilian companies. The results indicate that the last year of the CEOs mandate is decisive for the practice of earnings management, both for accounting choices and for operational decisions. However, it was found that the long-term CEOs do not present intentions to earnings management by the accounting choices, and in operational decisions their intentions are to report more conservative results. It was concluded that the variable remuneration had no effect on the relationship between the term of the CEOs term and the earnings management by the accounting choices. However, for management by operational decisions, variable remuneration had an effect on the intentions of CEOs with a long mandate, further reducing their intensions as the share of variable remuneration increased.