The Value-Relevance of Stock-Based Employee Compensation Disclosures

Rees, Lynn L.; Stott, David

doi:10.2139/ssrn.145929

Cited by 21 publications

(21 citation statements)

References 13 publications

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“…Some previous researches find a positive relation between a firm's share price and the ESO expense and interpret that outcome as driven by the fact that expected benefits related to ESO prevail over the stock‐based compensation cost. Rees and Stott (2001) find a significant positive association between the disclosed stock option expense and the firm value and note that it is greater for high‐growth companies, with a high demand for cash. This means that the incentive benefits provided by ESO s outweigh their dilution cost and that ESO s convey a positive signal to the market.…”

Section: Hypothesis Developmentmentioning

confidence: 73%

“… The extant academic literature has predominantly focused on stock‐based compensation within the context of the Unites States (see, for instance, Aboody, 1996; Skinner, 1996; Rees and Stott, 2001; Bell et al, 2002; Espahbodi et al, 2002; Hanlon et al, 2003; Aboody et al, 2004; Aboody et al, 2006; Landsman et al, 2006). The overriding conclusion of these papers is in favor of applying the Asset and Liability method to account for ESO s. This paper offers the opportunity to determine the extent to which the findings of this U.S. research can be generalized to a European setting where the institutional environment and the practices for issuing ESO s are quite different.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Accounting for Employee Stock Options: What Can We Learn from the Market's Perceptions?

Bagna¹,

Bini²,

Bird³

et al. 2010

Financ Manag Account

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The scope of this is paper is to provide new empirical evidence on the value relevance of employee stock options (ESOs) in Europe. We show, empirically, that the market participants when pricing a firm's equity place approximately the same valuation weights on the ESOdeferred compensation expense (the so called ''ESO asset'') and the compensation option liability (the so called ''ESO liability''). Our empirical findings support the theoretical work of Ohlson and Penman who suggest that the deferred compensation expense be treated as a contra-liability. The second contribution of our work rests on the nature of the ESO expense. We show that the distinction between persistent and non-persistent ESO expenses is of critical importance for the market participants. Accordingly, an improved accounting disclosure should assist the investors in assessing the long-term goals of the ESO plans at the firm level.

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Section: Hypothesis Developmentmentioning

confidence: 73%

Section: Introductionmentioning

confidence: 99%

Accounting for Employee Stock Options: What Can We Learn from the Market's Perceptions?

Bagna¹,

Bini²,

Bird³

et al. 2010

Financ Manag Account

View full text Add to dashboard Cite

show abstract

“…Research into the incremental information content of alternative firm performance measures is one example, with measures such as comprehensive income versus net income (Dhaliwal et al 1999), cash flows and accruals (Pfeiffer et al 1998), cash flow from operations versus investing and financing cash flow (Cheng et al 1997, Black 1998 or diluted versus other EPS measures (Balsam and Lipka 1998). Others have looked at the usefulness of disclosing information in the notes of the financial statements, like details on deferred tax components (Amir et al 1997;Ayers 1998) or on employee compensations (Aboody 1996;Amir 1996;Rees and Stott 2001), fair value estimates of investment securities and derivatives for banks (Barth 1994;Barth and Clinch 1996;Venkatachalam 1996) ……”

Section: Research On Standard Setsmentioning

confidence: 99%

Attribute differences between U.S. GAAP and IFRS earnings: An exploratory study

Meulen

Gaeremynck

Willekens

2007

The International Journal of Accounting

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With the successful completion of the IASC's standards, IFRS and US GAAP were placed as the two pre-eminent world financial reporting frameworks. For years, however, US GAAP was accepted widely as the international set of standards to ensure high quality financial statements. Especially in the US, but also elsewhere, the introduction of IFRS has lead to a discussion on the (relative) quality of both regimes. However, relatively little research has been devoted to the subject. In this study, we address that void and further compare the quality of the two standard regimes using a sample of German New Market firms. Financial statement quality is measured applying multiple earnings attributes traditionally used in accounting research. Consistently throughout our measures, we find that the quality of US GAAP prepared financial statements and IFRS information is overall very comparable. Only with regard to predictive ability of accounting information do we find US GAAP superiority.

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“…If variables are not included to control for the future payoffs to ESOs (Aboody, Barth and Kasznik 2002) the estimated coefficient on the ESO variable represents the net effect (payoffs less the grant cost). Such studies portray a mixed picture as some studies find that investors view options as an expense (Aboody 1996, Chamberlain andHsieh 1999) while others find that investors view options as an asset (Bell, Landsman, Miller, Yeh 2000;Rees and Stott 1998). Aboody et al (2002) include analysts expected earnings growth to control for expected ESO payoffs and find a negative coefficient on ESO cost.…”

Section: Introductionmentioning

confidence: 99%