Journal of Economics and Management Volume 21, No. 2 September, 2025

The Effect of the CEO Power and the Increase of Directors’ and Supervisors’ Compensations in Loss-making Firms on Earnings Management

Mei-Mei Song

Department of Finance, National Changhua University of Education, Taiwan

Jia-Rong Wu

National Changhua University of Education, Taiwan

Yi-Dun Chiang

National Changhua University of Education, Taiwan

Li-Ching Chen

National Changhua University of Education, Taiwan

Ming-Tsang Lee

National Changhua University of Education, Taiwan

Abstract

Following the Financial Supervisory Commission's 2020 regulatory announcement regarding the compensation of directors and supervisors in loss-making firms, this study examines the impact of CEO power and the increase in director and supervisor compensation on earnings management. Earnings management is primarily measured using discretionary accruals (AEM) as a proxy variable. This study utilizes data from listed companies in Taiwan obtained from the Taiwan Economic Journal (TEJ) database from 2020 to 2022. The empirical results indicate a significantly positive relationship between CEO power and earnings management and between the increase in director and supervisor compensation in loss-making firms and earnings management.

Keywords：CEO Power, The Increase of Directors' and Supervisors' Compensations in Loss-making Firms, Earnings Management

JEL Classifications：G3, J3, M4

BACK