Earnings are the closest measure in financial statements for market size and firm dominance in the market. Accordingly, earnings may convey information related to investors’ decision-making in addition to the information contained in current profits. The purpose of this study is to examine the effect of the value-relevance of earnings on executive compensation and the mediating role of investor sentiments. In this study, in order to examine and analyze the hypotheses, data related to 120 companies listed on the Tehran Stock Exchange for the period 2015 to 2023 were extracted and a panel data regression model was used to test the research hypotheses. The results of the study indicate that the value-relevance of earnings has a significant effect on executive compensation. Also, the results of the second hypothesis of the study indicate that investor sentiments have a significant effect on the relationship between the value-relevance of earnings and executive compensation. In the modern economy, shareholders increasingly prioritize creating new markets and protecting market share in addition to making profits, and earnings are the most appropriate variable in financial reports to communicate these achievements.