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)
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
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number
0413.
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.: