The Role of Accounting in the Design of CEO Equity Compensation

Accounting Review - Tập 82 Số 2 - Trang 327-357 - 2007
Mary Ellen Carter1, Luann J. Lynch2, İrem Tuna1
1University of Pennsylvania,
2University of Virginia

Tóm tắt

We examine the role of accounting in CEO equity compensation design. For a sample of ExecuComp firms in 1995–2001, we find that financial reporting concerns are positively related to stock option use and total compensation, and negatively related to the use of restricted stock. We confirm our findings by examining changes in CEO compensation in firms that begin expensing options in 2002 or 2003. We find that these firms reduce their option use and increase their restricted stock use after starting to expense options but exhibit no decrease in total compensation. Taken together, our analyses suggest that favorable accounting treatment for options led to a higher use of options and lower use of restricted stock than would have been the case absent accounting considerations.

Từ khóa


Tài liệu tham khảo

10.1111/1475-679X.00093

10.1111/j.1475-679X.2004.00132.x

2004, The Accounting Review, 79, 251, 10.2308/accr.2004.79.2.251

Allgood S., 2000, Journal of Financial Research, 23, 373, 10.1111/j.1475-6803.2000.tb00748.x

10.1086/367752

Anderson, S., J. Cavanagh, C. Hartman, S. Klinger, and H. Sklar. 2002. Excessive Excess 2002. Washington, D.C.: Institute for Policy Studies.

Anthony, J. H., B. Bettinghaus, and D. B. Farber. 2004. Earnings management and the market response to convertible debt issuance. Working paper, Michigan State University, East Lansing, MI.

10.1016/S0165-4101(98)00017-2

10.2307/2491414

10.1016/S0165-4101(02)00045-9

Bear Stearns & Company, Inc. 2004. FASB Does It: FAS 123(R) Requires Stock Option Expensing. December 16. New York, NY: Bear Stearns.

- 2006. Employee Stock Options: 749 Companies Accelerate Stock Options' Vesting. January 6. New York, NY: Bear Stearns.

Botosan C., 2001, Accounting Horizons, 15, 311, 10.2308/acch.2001.15.4.311

10.1086/209658

10.1016/S0165-4101(97)00017-7

- and M. Eames. 1999. Management of earnings and analyst forecasts. Working paper, University of Washington, Seattle, WA.

10.1016/S0165-4101(02)00097-6

- and - 2005. Agency issues in compensation contract design: Evidence from the change in accounting for stock option repricings. Working paper, University of Pennsylvania, Philadelphia, PA.

Choudary, P., S. Rajgopal, and M. Venkatachalam. 2006. Accelerated vesting of employee stock options in anticipation of FAS 123-R. Working paper, Duke University, Durham, NC.

10.1016/S0165-4101(99)00019-1

10.1016/S0304-405X(01)00062-9

- and D. Larcker. 2003. Executive equity compensation and incentives: A survey. Economic Policy Review (April).

10.2307/2491422

10.1016/0165-4101(94)90008-6

10.1086/209601

10.1111/1475-679X.00083

Doubleday, D., and S. Fujii. 2001. Weighing your options, equity strategies in a volatile market. WorldatWork Journal (Second Quarter).

10.1016/S0165-4101(02)00048-4

Farber, H. S. 1999. Mobility and stability: The dynamics of job change in labor markets. In Handbook of Labor Economics, Vol. 3, edited by O. Ashenfelter, and D. Card. New York, NY: Elsevier Science.

10.1023/A:1011377902967

Financial Accounting Standards Board (FASB). 1995. Accounting for Stock-Based Compensation. Statement of Financial Accounting Standards No. 123. Norwalk, CT: FASB.

- 2004. Share-Based Payment. Statement of Financial Accounting Standards No. 123(R). Norwalk, CT: FASB.

10.1016/0165-4101(93)90007-3

10.1016/S0165-4101(01)00050-7

Hand J., 1990, The Accounting Review, 65, 740

10.1111/1475-679X.00069

Kimbrough, M., and H. Louis. 2004. Financial reporting incentives, corporate governance, and the trade-off among alternative forms of executive compensation. Working paper, Harvard University, Boston, MA.

10.1016/S0304-405X(96)00888-4

Lambert, R., and D. Larcker. 2004. Stock options, restricted stock, and incentives. Working paper, University of Pennsylvania, Philadelphia, PA.

Larcker, D., and T. Rusticus. 2005. On the use of instrumental variables in accounting research. Working paper, Stanford University, Stanford, CA.

Matsunaga S., 1995, The Accounting Review, 70, 1

10.1016/0165-4101(85)90026-6

10.1016/j.jfineco.2004.03.004

10.1016/j.jfi.2005.09.003

10.1506/KHNW-PJYL-ADUB-0RP6

10.1016/S0929-1199(00)00021-3

Sebora T. C., 1996, Journal of Managerial Issues, 8, 54

10.1111/j.1475-679X.2004.00133.x

10.1016/0304-405X(92)90029-W

10.1016/0165-4101(94)90030-2

10.1111/0022-1082.00079

10.1016/S0304-405X(98)00032-4

Watts, R., and J. Zimmerman. 1986. Positive Accounting Theory. Englewood Cliffs, NJ: Prentice Hall.

1990, The Accounting Review, 65, 131

10.1016/0304-405X(95)00829-4