Executive incentives and earnings management under economic policy uncertainty

This study examines whether executive option-based incentives (Delta) mitigate opportunistic reporting responses triggered by Economic Policy Uncertainty (EPU). Using Korean data (2003–2025), this study finds that higher EPU encourages earnings management, but this association is significantly attenuated for high-Delta CEOs. Economically, the empirical results demonstrate that Delta provides a substantial buffer against uncertainty-induced reporting distortions. These results identify a state-contingent mechanism where value-tied incentives preserve information quality during shocks. This research extends Kim and Lee by shifting the focus to the corporate information environment.