Bonus Plans Research Articles

THE INFLUENCE OF DEBT COVENANT, PROFITABILITY, BONUS PLAN, AND EXCHANGE RATE ON TAX AVOIDANCE WITH TRANSFER PRICING AS AN INTERVENING VARIABLE IN RAW GOODS SECTOR COMPANIES ON THE INDONESIAN STOCK EXCHANGE

In companies operating in the Raw Goods Sector that are publicly traded on the Indonesian Stock Exchange, the objective of this research is to determine how debt covenants, profitability, bonus plans, and exchange rates influence transfer pricing. Furthermore, the study seeks to ascertain the impact of transfer pricing, equity markets, debt covenants, profitability, and compensation schemes on tax evasion within the Raw Materials Sector of Indonesian Stock Exchange-listed companies. The research methodology employed in this study is associative research. The subject of investigation is the raw materials industry on the Indonesia Stock Exchange throughout the period from 2018 to 2022. The population for this study consists of 96 companies registered on the Indonesia Stock Exchange in the primary consumer products industry, spanning from 2018 to 2022. The research employed a purposive sampling strategy. This research consisted of a sample size of 23 firms. The data analysis technique is facilitated by the utilization of a specific tool, namely Statistical Product and Service Solution (SPSS) version 26. The research findings indicate that the variables of debt covenant, bonus plan, exchange rate, and transfer pricing do not have any impact on tax avoidance. However, profitability is found to have a negative influence on tax avoidance. Debt covenant, profitability, bonus plan, and exchange rate do not impact transfer price. In addition, transfer pricing is unable to reconcile debt covenants, profitability, compensation schemes, and the impact of exchange rates on tax evasion.. Indonesia as a country that has many companies that have been successful at the national and international levels can increase sources of state revenue. As the company's profit rises, the corresponding tax payment also grows. This forms the basis for companies to employ tax evasion tactics in order to reduce their tax obligations. This study investigates the factors that influence tax evasion

Shaping Incentives through Measurement and Contracts

ABSTRACT I study productive activity, measurement, and compensation in a principal agent model that relaxes common restrictions on the action set of the agent, the distribution of performance measures, and the shape of the wage schedule. The solution to this relaxed problem unifies insights from extant theory and shares features with well-known empirical phenomena. In particular, the optimal outcome distribution has a kink, optimal measurement is conservative, and optimal wages ensure congruent incentives and resemble accounting-based bonus plans featuring a floor, hurdle bonus, incentive zone, and ceiling, with thresholds that may reference other performance measures. Beyond these specific insights, the paper provides a flexible framework for studying how incentives are shaped through measurement and contracts.

Pengaruh Growth Opportunity, Corporate Social Responsibility, dan Bonus Plan Terhadap Konservatisme Akuntansi

This research aims to test and analyze the influence of growth opportunities, corporate social responsibility, and bonus plans on accounting conservatism. This type of research is quantitative using secondary data. The population used in this research was all manufacturing companies listed on the Indonesia Stock Exchange during the 3 year period 2020-2022, totaling 226 companies, using a purposive sampling technique to produce 175 research samples. This research was tested using SmartPLS 4.0.9.4 using descriptive data analysis, discriminant validity test, coefficient of determination (R2), effect size (F2), path coefficient, and hypothesis testing. The results of the research hypotesis show that (1) growth opportunity has asignificant effect on accounting conservatism, (2) corporate social responsibility has no significant effect on accounting conservatism, and (3) bonus plans have a significant effect on accounting conservatism

THE DETERMINATION ACCOUNTING CONSERVATISM IN THE INDONESIA BANKING SECTORS

This research is a quantitative study that aims to analyze the significant influence of growth opportunities, bonus plans, political costs, tax incentives and CEO pensions on accounting conservatism in banking sector companies listed on the Indonesia Stock Exchange for the 2018-2020 period. Accounting conservatism as the dependent variable. This research uses secondary data in the form of annual reports and company financial reports with a research sample of 43 banking companies. The analytical method used is panel data regression analysis with SPSS version 14 data processing tools. The results of this research prove that (1) growth opportunities do not have a significant effect on accounting conservatism. (2) bonus plans have no significant effect on accounting conservatism. (3) political costs do not have a significant effect on accounting conservatism. (4) tax incentives have a significant effect on accounting conservatism. And (5) CEO retirement has a significant effect on accounting conservatism

Disturbing the Quiet Life? Competition and CEO Incentives

ABSTRACT Although it is well understood that product market competition acts as a disciplining mechanism that reduces inefficiencies, our understanding of the implications for firms’ incentive design choices is still limited. We use a comprehensive new measure of competition and examine its effect on four major choices: CEO equity portfolio incentives, annual bonus plan incentives, choice of performance measures, and difficulty of financial performance targets. We find that competition reduces firm profits and total CEO compensation, including equity grants, which then also weakens portfolio incentives. Firms respond by adjusting annual bonus plans to restore incentives. Specifically, we find that competition goes together with stronger bonus plan incentives, more challenging annual performance targets, and a greater emphasis on long-term performance measures. Finally, we show that competition increases performance relative to annual bonus targets, which we interpret as evidence that CEOs work harder but get paid less in highly competitive environments. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M52.

PENGARUH RESIKO KEUANGAN, CASH HOLDING, BONUS PLAN DAN PAJAK PENGHASILAN TERHADAP PERATAAN LABA PADA PERUSAHAAN X PERIODE 2021-2022

Xis a company engaged in the furniture sector. The purpose of this research is to determine and analyze the effect of financial risk, cash holding, bonus plans and income tax on income smoothing at Perusahaan Xfor the period 2021-2022. The population as well as the sample of this research is data on total debt, total assets, cash, current debt, monthly bonus, income tax, income and expenses at Perusahaan Xfor the period 2021-2022. The total population is 4 years x 12 months = 48. This research method uses multiple linear regression analysis. The results showed that financial risk had no effect on income smoothing at Company X for the period 2021-2022. Cash holding has no effect on income smoothing at Company X for the period 2021-2022. The bonus plan has no effect on income smoothing at Company X for the period 2021-2022. Income tax has an effect on income smoothing at Company X for the period 2021-2022. Financial risks, cash holding, bonus plans and income taxes have an effect on income smoothing at Company X for the period 2021-2022

Difficulty of Sustainability Performance Targets in CEO Bonus Plans

Drawing on insights from goal-setting theory, we assert that performance targets are highly likely to be reached when they are set lower than prior performance. We hand-collect data on sustainability performance targets in S&P 500 CEO bonus plans. We find that these targets are set lower than prior performance, demonstrating that sustainability targets are not difficult for CEOs to achieve. We also compare the difficulty of sustainability performance targets in CEO bonus plans with that of financial performance targets, showing that sustainability targets are significantly less demanding. Furthermore, we observe that almost two-thirds of sustainability performance targets are realized at the end of the year, which creates a favorable impression of sustainability performance. By setting easy CEO sustainability performance targets, we contend that boards do not motivate high effort on sustainability performance. The implications of our findings are threefold: (1) boards should set more challenging sustainability performance targets in CEO pay to effectively govern corporate sustainability performance; (2) firm stakeholders should actively engage with boards to ensure CEO compensation appropriately incentivizes high performance on sustainability matters; (3) ESG (environmental, social, governance) investors should be cautious if comparing ex post realized sustainability performance to ex ante targets, as the information may be misleading.

Does firm size moderate bonus plan, tunnelling incentive and tax avoidance on transfer pricing?

The research objective is to examine the effect of bonus plan, tunneling incentive and tax avoidance on transfer pricing. In addition, this study also aims to examine the effect of firm size in moderating the relationship between bonus plan, tunneling incentive and tax avoidance on transfer pricing. The population used is manufacturing sector companies listed on the Indonesia Stock Exchange. The sampling technique used purposive sampling and obtained 88 companies with observations for three years, so that 264 samples were observed. This study uses data analysis techniques, namely logistic regression analysis and Moderated Regression Analysis. The analysis result shows that bonus plan has no effect on transfer pricing. Tunneling incentive has positive effect on transfer pricing and tax avoidance has positive effect on transfer pricing. Firm size does not moderate the effect of bonus plan on transfer pricing. Firm size strengthens the effect of tunneling incentive on transfer pricing and firm size strengthens the effect of tax avoidance on transfer pricing. The theoretical implication of the research is that the company management has certain interests that can be seen from how the company performs tunnelling and tax avoidance by applying transfer pricing policy. While the practical implication for companies can consider the impact of the application of transfer pricing to reduce the risks that can occur.

Do boards effectively link firm objectives to CEO bonus performance measures?

AbstractThis study examines whether S&P 500 boards govern their firms effectively by linking short-term operational objectives to appropriate CEO bonus performance measures. Our cross-sectional regression analysis reveals that firms with higher growth opportunities place more reliance on sales and growth performance measures in CEO bonus plans. We also find that cash-strapped firms emphasize the use of cash-based CEO performance measures. However, boards of high-cost firms do not tie a greater portion of CEO bonus to measures informative of cost-cutting efforts. This observation is contrary to effective-governance expectations and implies that boards should regularly scrutinize CEO bonus measures to ensure alignment with value-creating firm objectives. Additionally, we report an increase over time in the mean weight of social-and-environmental measures in CEO bonus plans. Boards evaluate CEO performance on sustainability issues by including quantifiable short-term performance targets in CEO bonus plans. However, there is currently a dearth of evidence on the optimality of sustainability linked executive pay in the academic literature. Our evidence on the rising weight of social-and-environmental measures in CEO bonus plans should motivate further research on this topic.

EFFECT OF FEMALE DIRECTORS ON INCOME SMOOTHING

One of the parameters for investors to assess a company is by looking at its earnings. Companies strive to present good and stable earnings, which may lead to the practice of income smoothing. Directors, who have decision-making authority, along with the underlying upper echelon theory that supports the differences in characteristics and gender of women, known for their meticulousness and risk-averse nature, tend to reduce earnings management practices. The objective of this research is to examine the influence of female directors on income smoothing. The research population consists of state-owned enterprises (BUMN) listed on the Indonesia Stock Exchange from 2019 to 2021. The research sample was selected using purposive sampling. Logistic regression analysis was used to test the research data. The results that female directors do not have a significant impact on earnings management. The research includes four control variables, namely cash holding, bonus plan, profitability, and independent commissioners. Cash holding and bonus plan do not have a significant impact on income smoothing. Profitability has a significant negative impact on earnings management, while independent commissioners have a significant positive impact on income smoothing. Keywords: female directors, income smoothing, BUMN

ACCOUNTING CONSERVATISM: THE EFFECT OF FIRM PERFORMANCE, POSITIVE ACCOUNTING THEORY, AND LITIGATION RISK

The purpose of this study was to analyze the effect of firm performance, positive accounting theory proxied by bonus plan, debt covenant, and political cost, and litigation risk on accounting conservatism. The data used in this study is the annual report of food beverage subsector companies listed on Indonesia Stock Exchange in 2014-2019. The sampling technique being applied in this study is purposive sampling, with multiple linear regression. This results showed that firm performance and bonus plan have negative effect on accounting conservatism, while debt covenant, political cost, and litigation risk have no significant effect on accounting conservatism.Keywords: Accounting Conservatism, Firm Performance, Positive Accounting Theory, Litigation Risk.

Praktek Income Smoothing Ditinjau dari Cash Holding, Bonus Plan, Kepemilikan Institusional dan Profitabilitas

Purpose: This study aims to examine the effect of cash holding, bonus plans, institutional ownership, and profitability on income smoothing in financial sector companies listed on the Indonesia Stock Exchange. Methodology/approach: The research data is sourced from the Annual Report and Share Price Information of Finacial Companies Listed on the IDX (Indonesian Stock Exchange) 2017-2021. The analytical method uses logistic regression by SPSS 26. Findings: The results show that cash holding and bonus plan have no significant effect on income smoothing. Meanwhile, institutional ownership and profitability have signuficant effect on income smoothing Practical and Theoretical contribution/Originality: The implication of this research is expected to help investors and shareholders to understand the factors that can maximize management behavior to do income smoothing on financial statement. In addition, potential investors are expected to be able to use the findings of this study to help them assess the condition of the company before making investment decisions. Novelty of this research is focusing on the financial sector as a sample whereas previous research only focused on the non-financial sector. Research Limitation: Future studies may be useful to use other variables to income smoothing examined to provide a newly additional finding.

A Novel Pediatric Surgery Division Incentive Program Engaging Faculty, Advanced Practice Providers and Staff Around a Single Financial Growth Target

BackgroundProductivity-based financial incentive programs for faculty are common. We implemented a novel Division wide clinical productivity incentive sharing professional fee collections across faculty, nurses, and staff with half of bonuses reserved to be given out proportionally to achievement of the annual growth target. MethodsA novel bonus plan was formulated to incentivize collection of professional fees to achieve a 15% annual growth target. The 15% was divided equally between the clinical provider, the responsible provider's center(s) of excellence, and all Division members. 50% of the bonus pool was paid out monthly and the remaining 50% was held for an end of the year payout proportional to achievement of the Divisional professional fee collection annual growth target. Principal findingsDuring the initial year of the program, overall Division collections and charges grew 30% and 17%, respectively. Average monthly bonuses paid through the new incentive program for faculty, advanced practice providers, and staff were $1,700, $700, and $200, respectively. The program cost $525,000 in additional bonuses over the previous year while the Division saw an increase of 2 million dollars in collections over the previous year. ConclusionA clinical productivity incentive program based upon professional fee collections distributed across faculty, nurses, and staff was feasible and successful in its first year. Collections increased by a significantly higher percentage than charges, we believe collections incentive including support staff will be most useful in practices with lower rates of charge collection. Further study is needed to measure the effects of different components of the program. Level of EvidenceLevel IV. Study TypeCost Effectiveness Study.

FAKTOR-FAKTOR YANG MEMPENGARUHI PERATAAN LABA PADA PERUSAHAAN NON KEUANGAN YANG TERDAPAT PADA BURSA EFEK INDONESIA PERIODE 2018-2020

The practice of income smoothing is a common phenomenon that occurs as a management effort to reduce reported profit fluctuations. This study aims to determine the effect of managerial ownership, institutional ownership, Net Profit Margin, Cash Holding, Bonus Plan, and dividend payout ratio on income smoothing practices. The sample of this research is non-financial companies that are listed on the Indonesia Stock Exchange in 2018-2020. Data obtained from www.idx.co.id. Logistic regression analysis model with SPSS. The conclusion in this study is that managerial ownership, institutional ownership, Net Profit Margin, Cash Holding, and dividend payout ratio have a significant positive effect on income smoothing. Meanwhile Bonus Plan did not have significant effect on income smoothing.

Influence of Good Corporate Governance and Audit Quality on Discretionary Accrual with Performance as Mediation at Aneka Industry in Indonesia

Earnings management is engineering by managers to show better profits for bonus plans and company performance. This study aims to empirically examine the influence of good corporate governance and audit quality on earnings management with performance as a moderating variable in various industrial companies on the Indonesian stock exchange. The population of this study is various industrial companies with a sample of 180 companies during 2017-2022 with data processing using partial least squares (PLS) from secondary data from the Indonesian stock exchange's financial reports. The results of the study indicate that there is a significant effect of good corporate governance and audit quality on earnings management and performance is successful as a moderating variable in the effect of good corporate governance and audit quality on earnings management.

The Effects of Corporate Governance, Managerial Ownership and Bonus Plan on Earnings Management: A Case of ASEAN-3 Companies

This study is to examine and analyze the effects of corporate governance, managerial ownership, and bonus plan on earnings management of manufacturing and financial companies, which are listed on the Indonesia Stock Exchange, Malaysia Stock Exchange, and the Philippines Stock Exchange. It analyzed the balance sheet data, income, and capital statements presented in the 2008-2012 periods and applied the multiple linear regression analysis and one-way ANOVA to test the proposed hypotheses. The findings showed that corporate governance, managerial ownership, and bonus plan simultaneously did not affect earnings management. There was no significant difference in the proportion of independent board of commissioners, the size of the board of directors, proportion of independent audit committee, managerial ownership, bonus plan, and earnings management between Indonesia, Malaysia, and the Philippines stock exchanges. It implies that the ASEAN-3 companies consider corporate governance unimportant in managing their earnings. It also gives new insights into a rare phenomenon of agency theory findings in semi-strong market efficiency post-global financial crisis 2008.

Analisis Penerapan Konservatisme Akuntansi dalam Perspektif Positive Accounting Theory Pada Bank Umum Syariah di Indonesia

The objective of this research is to examine the implementation of accounting conservatism in the context of positive accounting theory, which includes the bonus plan, debt covenant, and political cost hypothesis. The study focused on 45 Islamic Bank Companies listed on Financial Services Authority (OJK) between 2017 and 2021, and the sample was chosen using purposive sampling based on specific criteria. The multiple regression technique was employed for analysis. The results indicate leverage and firm size have a positive effect on accounting conservatism, while capital intensity has a negative effect on accounting conservatism. Public and managerial ownership do not have an impact on accounting conservatism. Therefore, the study concludes that accounting conservatism is affected by leverage, firm size, and capital intensity.

A study of positive accounting practice

Financial accounting, as a branch of science from social science, practically describes the behavior of the presenters of financial statements. This study is confirmatory descriptive research, data obtained from the annual reports of banking companies on the Indonesia Stock Exchange. This study constructs a research model using four variables: accounting conservatism, managerial ownership, debt covenants, and political costs. The data is processed using path analysis, and the test is carried out through two stages: testing the direct and indirect effects. The direct effect finding proved that the bonus plan, debt covenant, and political cost hypothesis had been significantly practiced. Another direct influence finding also proved that managerial ownership has a significant effect on debt covenants and that political costs have a significant effect on debt covenants. This research also demonstrated that debt covenants could not mitigate the impact of political costs and managerial ownership on accounting conservatism practice. The board of commissioners, as the highest supervisory body and the supervisory units, has the responsibility to control the opportunistic behavior of managers so that banks can effectively practice a healthy financial statements process and so that public trust in banks increases.

Economic Determinants and Consequences of Performance Target Difficulty

ABSTRACT Using data on earnings targets in annual bonus plans, we construct and validate an empirical measure of beginning-of-year target difficulty and show that it is negatively associated with market uncertainty, retention concerns, and Chief Executive Officer (CEO) entrenchment. We then present several findings about the effect of target difficulty on performance and CEO compensation. First, greater target difficulty in annual bonus plans is associated with significantly lower CEO cash compensation as well as with decreases in other compensation awards. Second, moderately challenging targets (neither too easy nor too difficult to achieve) are associated with abnormal reversals in fourth-quarter performance, particularly reductions in fourth-quarter performance after abnormally favorable third-quarter performance. Third, greater target difficulty is associated with higher same-year abnormal earnings but at the same time with lower next-year earnings and stock returns. Combined, our findings suggest that target difficulty is an important incentive design choice that affects performance and executive compensation. Data Availability: Data used in this study are publicly available.

Pengaruh Beban Pajak, Bonus Plan, dan Tunneling Incentive Terhadap Keputusan Transfer Pricing

Transfer pricing is indicated as a strategic step in conducting transactions regarding competitive pricing by related companies. With transfer pricing, the company can assess the performance of the members or divisions of the company. The transfer pricing problem arises because of the manipulation by the company. This study aims to determine the influence of the tax load, bonus plan, and tunneling incentive partially and simultaneously on the transfer pricing decision. The research used a quantitative method with the expost facto design. The population in this study was companies that were members of the Jakarta Islamic Index (JII) in 2018-2020. The research sample was selected using purposive sampling of 11 companies from 30 companies. This study used secondary data obtained from the Indonesia Stock Exchange. The data analysis technique used was multiple linear regression analysis with SPSS 26 program. The results showed that the f test of the tax load, bonus plan, and tunneling incentive simultaneously had a significant effect on the transfer pricing decision. Meanwhile, the results of the t-test showed that the tax load did not affect the transfer pricing decision. The bonus plan had a significant negative effect on the transfer pricing decision. The tunneling incentive had a significant positive effect on the transfer pricing decision.