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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

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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  • Choudhary, Preeti, 2011. "Evidence on differences between recognition and disclosure: A comparison of inputs to estimate fair values of employee stock options," Journal of Accounting and Economics, Elsevier, vol. 51(1), pages 77-94.
    • Handle: RePEc:eee:jaecon:v:51:y:2011:i:1:p:77-94
    DOI: 10.1016/j.jacceco.2010.09.004
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    More about this item

    Keywords

    Fair value; Earnings management; Recognition versus disclosure; Employee stock options;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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