Executive incentives and earnings management under economic policy uncertainty

This study examines whether executive option-based incentives (Delta) mitigate opportunistic reporting responses triggered by Economic Policy Uncertainty (EPU). Using Korean data (2003–2025), this study finds that higher EPU encourages earnings management, but this association is significantly attenuated for high-Delta CEOs. Economically, the empirical results demonstrate that Delta provides a substantial buffer against uncertainty-induced reporting distortions. These results identify a state-contingent mechanism where value-tied incentives preserve information quality during shocks. This research extends Kim and Lee by shifting the focus to the corporate information environment.

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Publication Details

Journal
Applied Economics Letters
Published
2026-10-14
DOI
https://doi.org/10.1080/13504851.2026.2749675
Primary Topic
Auditing, Earnings Management, Governance
Type
article
Field-Weighted Citation Impact
0.00
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article

Executive incentives and earnings management under economic policy uncertainty

Na-Youn Kim
Applied Economics Letters
Auditing, Earnings Management, Governance
article

Executive incentives and earnings management under economic policy uncertainty

Na-Youn Kim
article en

Abstract

This study examines whether executive option-based incentives (Delta) mitigate opportunistic reporting responses triggered by Economic Policy Uncertainty (EPU). Using Korean data (2003–2025), this study finds that higher EPU encourages earnings management, but this association is significantly attenuated for high-Delta CEOs. Economically, the empirical results demonstrate that Delta provides a substantial buffer against uncertainty-induced reporting distortions. These results identify a state-contingent mechanism where value-tied incentives preserve information quality during shocks. This research extends Kim and Lee by shifting the focus to the corporate information environment.

Applied Economics Letters
Yong In University (KR)
Openalex Percentile: Top 4%
Auditing, Earnings Management, Governance
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