International Research Journal of Education and Technology

Since the global financial disaster, management incentive compensation, which is receptive to financial firms’ short-term performance, has been noted to warn financial systems’ sustainability by incentivizing managers to follow extreme risks. Consequently, International Standards have been recognized regarding compensation for financial institutions’ senior executives and employees. However, this compensation may force not only banks’ risk-taking behaviors, but also their earnings management. So, this study analyzed executive compensation’s impact on earnings management. This study evaluated rigid impacts across multiple magnitudes by analyzing the effects of inducement compensation standards proposed to increase financial systems’ sustainability on individual financial institutions and further contributes to studies on managerial decision making.