The wide use of accounting-based incentives is controversial because earnings growth does not automatically translate into increased shareholder value.

Question

Quizplus · Accepted Answer

Accounting-based incentives, such as bonuses tied to earnings growth, may encourage managers to manipulate financial statements or focus on short-term gains rather than long-term strategic planning. This can result in increased earnings but may not necessarily lead to sustainable growth or increased shareholder value.

The Wide Use of Accounting-Based Incentives Is Controversial Because Earnings