Healy’s findings supported the bonus plan hypothesis

What are the joint incentive effects of bonus schemes
and other forms of compensation, such as performance plans?"

“A second difference between the samples is the stronger result for portfolio LOW for sample B than sample A.
I have no explanation for this result.”

Limitation
pp.106-107
p.98
The contingency tests arises from errors in measuring earnings before discretionary accruals
which also could increase the probability of incorrectly rejecting the null hypothesis.

The use of contingency tests arise from errors in measuring discretionary accruals.

What Was The
Sample Used?
Out of 250 companies on the 1980 Fortune Directory of the largest U.S.

Healy conducted a study on the bonus plan ..

...assumptions about earnings management motivations, such as the income smoothing hypothesis (Liberty and Zimmerman, 1986; Ronen and Sadan, 1981; Bartov, 1992, among others), the bonus plan hypothesis (=-=Healy, 1985-=-; Gaver et al, 1995; Holthausen, 1995, among others), or ratchet effects (Sheikh, 2001). Our sampling methodology ensures that we examine the performance of firms and CEO compensation in a representat...


Bonus plan hypothesis – Healy 1985 .

Support the bonus plan hypothesis.