Authors: Chia-Ying Chan and Kuo-An Li
This paper proposes to delineate the relationship between the likelihood of executives committed to financial fraud and various types of executive perquisite/corporate governance factors. This paper hopes to offer a plausible explanation for the occurrence of recent accounting scandals. This study also hopes to alleviate concerns from all relevant stakeholders (i.e. policy makers, market participants) regarding incidents of financial fraud due to lavish executive perquisites.The empirical results confirm that the occurrence of financial fraud is positively associated with the total amount of perks but negatively associated with bonuses. The results confirm that the occurrence of financial fraud is positively associated with the total number of perks but negatively associated with bonuses. Furthermore, firms that voluntarily adopted fair valuation prior to 2007 are less likely to commit financial fraud, which may be due to better information transparency and better corporate governance.
Keywords: Executive perquisites; executive compensation; financial fraud