Template-Type: ReDIF-Article 1.0
Author-Name: Ei Yet Chu 
Author-Workplace-Name: Graduate School of Business, Universiti Sains Malaysia, 11800 Pulau Pinang 
Author-Email: eychu@usm.my
Author-Name: Saw Imm Song
Author-Workplace-Name: Universiti Teknologi Mara, 13500 Pulau Pinang
Title: Executive Compensation, Earnings Management and Over Investment in Malaysia
Abstract: The study investigates the inter-relationship between executive compensation, earnings management and over investment. Using a sample of 196 Malaysian public listed firms, the findings show a positive endogenous relationship between executive compensation and over investment. Measuring equity compensation in incentive ratio, for each percent of over investment, one percent improvement in share prices will increase 23% of executive directors' equity value. Over investment, however, leads to a decline in 
executive directors' equity value in large shareholders controlled firms. In addition, one percent of over investment can explain 12% of earnings management. Nevertheless, earnings management does not explain executive directors' compensation. In summary, aligning over-investment with executive compensation schemes has implied that the existing compensation is insufficient for executive directors to align their interest with the objective to maximise shareholders' value. 
Classification-JEL:
Keywords: executive compensation, earnings management, investment, large 
shareholders, Malaysia 
Journal: Asian Academy of Management Journal of Accounting and Finance
Pages: 13-37
Volume: 8
Issue: Supp. 1
Year: 2012
File-URL: http://web.usm.my/journal/aamjaf/vol%208-s1-2012/8-s1-2.pdf
File-Format: Application/pdf
Handle: RePEc:usm:journl:aamjaf00811_13-37