Cookies?
Library Header Image
LSE Research Online LSE Library Services

Which approach to accounting for employee stock options best reflects market pricing?

Landsman, Wayne R., Peasnell, Ken V., Pope, Peter and Yeh, Shu (2006) Which approach to accounting for employee stock options best reflects market pricing? Review of Accounting Studies, 11 (2-3). pp. 203-245. ISSN 1380-6653

Full text not available from this repository.

Identification Number: 10.1007/s11142-006-9008-x

Abstract

We use a residual income valuation framework to compare equity valuation implications of four approaches to employee stock options (ESOs) accounting: APB 25 “recognize nothing”, SFAS 123 (revised) “recognize ESO expense”, FASB Exposure Draft “recognize and expense ESO asset” and “recognize ESO asset and liability”. Theoretical analysis shows only grant date recognition of an asset and liability, and subsequent marking-to-market of the liability, results in accounting numbers that capture the dilution effects of ESOs on current shareholder value. Out-of-sample equity market value prediction tests and in-sample comparisons of model explanatory power also support the “recognize ESO asset and liability” method.

Item Type: Article
Official URL: http://link.springer.com/journal/11142
Additional Information: © 2006 Springer Science+Business Media, LLC
Divisions: Accounting
Subjects: H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G3 - Corporate Finance and Governance
Sets: Departments > Accounting
Date Deposited: 23 Oct 2013 13:22
Last Modified: 20 Jun 2020 01:11
URI: http://eprints.lse.ac.uk/id/eprint/53757

Actions (login required)

View Item View Item