The Effect of Precision and Sensitivity Dimensions of profit on Board of Directors Bonus

Nowadays, due to agency problems caused by the separation of ownership from management, efforts to create a balance between the interests of them have become one of the intellectual concerns of companies. If the reward is not commensurate with board of directors actual performance not only increase corporate value but also is a means to transfer wealth from owners to managers. From the important indicators in measuring performance in bonus plans is the precision and sensitivity of reported earnings. In this study, the precision and sensitivity indicators of profit and their effect on board of directors bonus has been studied. To test the assumptions, data related to the sample of 121 companies listed in Tehran Stock Exchange for the period 2009 to 2016 were used and the above mentioned data have been analyzed using multivariate regression and Panel data analysis method. The results show that from the precision dimensions of profit, the abnormal accruals and Manipulation activities in the form of increased profits according to research expectations has significant and positive impact on bonus that indicated the lack of sufficient attention to them as a decreasing indicator of profit precision while expense matching and cash flow forecast precision according to research expectations have significant effect on board of directors bonus. The sensitivity dimensions of profit i.e. earnings response coefficients and returns fluctuations Indicators, have a positive and negative impact on board of directors bonus respectively.