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Firms' Voluntary Recognition of Stock-Based Compensation Expense

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Author Info

  • Aboody, David

    (U of California, Los Angeles)

  • Barth, Mary E.

    (Stanford U)

  • Kasznik, Ron

    (Stanford U)

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    Abstract

    This study investigates factors associated with firms' decisions in 2002 and early 2003 to recognize stock-based compensation expense under Statement of Financial Accounting Standards (SFAS) No. 123. We find that the likelihood of SFAS 123 expense recognition is significantly related to the extent the firm is active in capital markets, private incentives of top management and members of the board of directors, the extent of information asymmetry, and political costs. Although recognizing firms have significantly smaller SFAS 123 expense, we find no significant incremental relation between recognition likelihood and SFAS 123 expense magnitude after controlling for other factors we expect explain the recognition decision. We also find significant positive announcement returns for earlier announcing firms, particularly those stating that increased earnings transparency motivates their decision.

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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1795(R).pdf
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    Bibliographic Info

    Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1795r.

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    Date of creation: Dec 2003
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    Handle: RePEc:ecl:stabus:1795r

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    Cited by:
    1. Borio, Claudio & Tsatsaronis, Kostas, 2004. "Accounting and prudential regulation: from uncomfortable bedfellows to perfect partners?," Journal of Financial Stability, Elsevier, vol. 1(1), pages 111-135, September.

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