The Impact of the New Revenue Recognition Standard (IFRS 15) Adoption on CEO Compensation：Evidence from Korea

초록

[Purpose] This study examines the impact of IFRS 15, a new revenue recognition standard, on CEO compensation. Specifically, it investigates whether managerial discretion enabled by IFRS 15 provides opportunities for CEOs to manage earnings and subsequently increase their compensation. [Methodology] Using a sample of 2,230 firm－year observations from 2013 to 2022 in Korea, where IFRS is mandatorily adopted, the study employs an ordinary least squares (OLS) regression model with industry and year fixed effects. The analysis focuses on CEO compensation before and after IFRS 15 adoption while controlling for firm－specific variables such as size, leverage, and governance characteristics. [Findings] The results reveal that CEO compensation significantly increased after the adoption of IFRS 15, with discretionary room under the new standard enabling CEOs to influence performance metrics tied to their pay. The effect is more pronounced in firms with self－interested CEOs. Moreover, the increased compensation is largely attributed to rent－seeking behavior rather than performance－based incentives. [Implications] This study highlights the unintended consequences of IFRS 15, underscoring the need for strong governance frameworks to mitigate managerial opportunism. It provides important implications for regulators, suggesting that improvements in accounting standards should be complemented by effective governance mechanisms to ensure the reliability of financial information and fairness in executive compensation.

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