Earnings Management and Equity Incentives: Evidence from the European Banking Industry.

Purpose ? This study aims to examine the effect of equity incentives on earnings management that occurs via the use of loan loss provisions, using a sample of 204 bank year observations over the period 2006?2011. Design/methodology/approach ? The authors use the data of 39 European banks to test the main hypothesis. Several valuation models and regressions are employed to measure the main proxies for executives? compensation and the determinant factors of loan loss provisions.