The paper by Daniel Bergstresser and Thomas Philippon examines the relationship between CEO incentives and earnings management. They find that CEOs whose compensation is closely tied to stock and option holdings are more likely to manipulate reported earnings through discretionary accruals. During periods of high accruals, CEOs exercise large amounts of options and sell significant quantities of shares. The study uses data from the 1990s to assess the impact of increasing stock-based CEO compensation on earnings management. It also discusses the broader implications of this relationship for corporate governance and the potential for managers to exploit their discretion in reporting earnings. The findings suggest that highly incentivized CEOs may engage in more aggressive earnings manipulation, which can have negative consequences for firm value.The paper by Daniel Bergstresser and Thomas Philippon examines the relationship between CEO incentives and earnings management. They find that CEOs whose compensation is closely tied to stock and option holdings are more likely to manipulate reported earnings through discretionary accruals. During periods of high accruals, CEOs exercise large amounts of options and sell significant quantities of shares. The study uses data from the 1990s to assess the impact of increasing stock-based CEO compensation on earnings management. It also discusses the broader implications of this relationship for corporate governance and the potential for managers to exploit their discretion in reporting earnings. The findings suggest that highly incentivized CEOs may engage in more aggressive earnings manipulation, which can have negative consequences for firm value.