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We examine the relation between executive compensation and corporate fraud. Executives at fraud firms have significantly larger equity-based compensation and greater financial incentives to commit fraud than do executives at industry-and size-matched control firms. Executives at fraud firms also earn significantly more total compensation by exercising significantly larger fractions of their vested options than the control executives during the fraud years. Operating and stock performancedoi:10.2139/ssrn.395960 fatcat:4lh34tz5mvathc6vumkbcckix4