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Evidence on differences between recognition and disclosure: A comparison of inputs to estimate fair values of employee stock options

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  • Choudhary, Preeti
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    Abstract

    I investigate reliability differences across recognition and disclosure regimes to shed light on differing incentives and reporting of employee stock option (ESO) fair values. I compare ESO fair values based on firm-reported inputs with ESO fair values based on benchmark inputs, estimated following authoritative guidance. On average, I find opportunism increases with recognition as compared with disclosure, and that it is associated with incentives to manage earnings. Despite the increase in opportunism, I find that accuracy does not decline for recognizers, and that accuracy differs across voluntary and mandatory recognition.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 51 (2011)
    Issue (Month): 1 ()
    Pages: 77-94

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    Handle: RePEc:eee:jaecon:v:51:y:2011:i:1:p:77-94

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    Web page: http://www.elsevier.com/locate/jae

    Related research

    Keywords: Fair value; Earnings management; Recognition versus disclosure; Employee stock options;

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    Cited by:
    1. Dan Dacian Cuzdriorean, 2013. "Most Recent Findings In Earnings Management Area: Interesting Insights From Traditionally Top 5 Leading Accounting Journals," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 5.
    2. Xiaoyan Cheng & David Smith, 2013. "Disclosure versus recognition: the case of expensing stock options," Review of Quantitative Finance and Accounting, Springer, vol. 40(4), pages 591-621, May.

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