Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Earnings Quality Consequences of Announcements to Voluntarily Adopt the Fair Value Method of Accounting for Stock-Based Compensation

Contents:

Author Info

  • Shilpa Manaktala

    (University of Connecticut, School of Business)

  • John D. Phillips

    ()
    (University of Connecticut, School of Business)

  • Karen Teitel

    ()
    (Department of Economics, College of the Holy Cross)

Registered author(s):

    Abstract

    We identify 133 firms that between July and December 2002, announced plans to voluntarily adopt the fair value method of accounting for stock-based compensation. We investigate whether such announcements increased the quality of these firms’ earnings as perceived by market participants. Answering this research question not only provides evidence relevant to the debate surrounding the expensing of employee stock options, but doing so provides evidence that conservative accounting choices in general lead to higher perceived earnings quality. Using two measures of earnings quality, the price-earnings relation and the earnings response coefficient, we find evidence consistent with an increase in perceived earnings quality for these firms relative to a control set of firms that in 2002 did not announce plans to adopt the SFAS 123 stock-based compensation recognition provisions.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://college.holycross.edu/RePEc/hcx/Teitel_Options.pdf
    File Function: 2004
    Download Restriction: no

    Bibliographic Info

    Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number 0413.

    as in new window
    Length: 36 pages
    Date of creation: Dec 2004
    Date of revision:
    Handle: RePEc:hcx:wpaper:0413

    Contact details of provider:
    Phone: (508)793-3362
    Fax: (508) 793-3708
    Web page: http://www.holycross.edu/departments/economics/website/
    More information through EDIRC

    Related research

    Keywords: SFAS; stock options; accounting; expensing options; fair value method;

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Fields, Thomas D. & Lys, Thomas Z. & Vincent, Linda, 2001. "Empirical research on accounting choice," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 255-307, September.
    2. David Aboody & Mary E. Barth & Ron Kasznik, 2004. "Firms' Voluntary Recognition of Stock-Based Compensation Expense," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 123-150, 05.
    3. Mary E. Barth & Greg Clinch & Toshi Shibano, 2003. "Market Effects of Recognition and Disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 41(4), pages 581-609, 09.
    4. Espahbodi, Hassan & Espahbodi, Pouran & Rezaee, Zabihollah & Tehranian, Hassan, 2002. "Stock price reaction and value relevance of recognition versus disclosure: the case of stock-based compensation," Journal of Accounting and Economics, Elsevier, vol. 33(3), pages 343-373, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:hcx:wpaper:0413. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victor Matheson).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.