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Contagion of accounting methods: evidence from stock option expensing

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  • David A. Reppenhagen

    (University of Florida)

Abstract

I examine how a firm’s accounting methods can be influenced by the choices of other firms, which I label contagion. I model accounting method choice as a combination of intrinsic propensities to adopt a method and contagion effects. I predict contagion of accounting methods occurs for two reasons: (1) adoption decisions of other firms are informative for the adoption decision, and (2) prior adoptions change the net benefits of the decision. I test these predictions in the stock option expensing setting where firms had the choice to use the intrinsic or fair value method. Using a firm-level diffusion model, I document evidence consistent with my predictions.

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  • David A. Reppenhagen, 2010. "Contagion of accounting methods: evidence from stock option expensing," Review of Accounting Studies, Springer, vol. 15(3), pages 629-657, September.
    • Handle: RePEc:spr:reaccs:v:15:y:2010:i:3:d:10.1007_s11142-010-9128-1
    DOI: 10.1007/s11142-010-9128-1
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    References listed on IDEAS

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    Cited by:

    1. Michael J. Jung, 2013. "Investor overlap and diffusion of disclosure practices," Review of Accounting Studies, Springer, vol. 18(1), pages 167-206, March.

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    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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