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.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 |
| Date Deposited: | 23 Oct 2013 13:22 |
| Last Modified: | 11 Dec 2024 23:06 |
| URI: | http://eprints.lse.ac.uk/id/eprint/53757 |
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