Stock option expense management after SFAS 123R

2014 ◽  
Vol 13 (3) ◽  
pp. 210-231 ◽  
Author(s):  
Jap Efendi ◽  
Li-Chin Jennifer Ho ◽  
Jeffrey J. Tsay ◽  
Yu Zhang
Keyword(s):  
Earnings Management ◽  
Stock Options ◽  
Design Methodology ◽  
Fair Value ◽  
Stock Option ◽  
Financial Accounting ◽  
Content Type ◽  
Management Literature ◽  
Prior Literature ◽  
Individual Input

Purpose – The purpose of this paper is to examine whether firms manage the total value of stock option grants downward after the implementation of Statement of Financial Accounting Standards (SFAS) 123R to reduce their reported option expenses. Design/methodology/approach – All Standard & Poor’s (S&P) 1500 firms with available stock option data in 2004 and 2006 are included in the analysis. The authors analyze if the total value of options granted, the per share fair value of options granted, the number of options granted as well as each individual input assumption have changed from the pre-SFAS 123R (i.e. 2004) to the post-SFAS 123R (i.e. 2006) period. We compare post-SFAS123R option pricing assumptions and per share fair value of options granted with their respective expected values to verify the results. We also analyze whether SFAS 123R has differential effects on firms which chose to disclose option expense only in footnotes (“disclosing firms”) versus firms which voluntarily recognized option expense (“recognizing firms”) prior to SFAS 123R. Findings – The results show that after SFAS 123R, the total fair value of stock options granted for disclosing firms declined significantly. The decrease appears to result from managerial discretion over volatility and dividend yield assumptions as well as the reduction in the number of options granted. The evidence suggests that firms engage in not only assumption-based manipulations but also real activities to lower reported stock option expenses. It was also found that disclosing firms lower the total fair value of stock options granted to a greater extent than recognizing firms. Originality/value – This study adds to prior literature that examines the opportunistic incentives for managers to use discretion in reporting stock option expenses. This study contributes to the earnings management literature by providing another example of manipulating earnings through real activities. Finally, our study should be of interest to regulators and investors.

Earnings management and goodwill impairment

2016 ◽  
Vol 17 (1) ◽  
pp. 120-147 ◽  
Author(s):  
Giuseppe Davide Caruso ◽  
Elisa Rita Ferrari ◽  
Vincenzo Pisano
Keyword(s):  
Earnings Management ◽  
Design Methodology ◽  
Income Smoothing ◽  
Financial Accounting ◽  
Current Debate ◽  
Managerial Behavior ◽  
Content Type ◽  
Listed Firms ◽  
Goodwill Impairment ◽  
Research Questions

Purpose – The purpose of this paper is to understand whether managerial behavior in impairing goodwill arising from M & As has changed after the adoption of IAS/IFRS, searching for evidences of earnings management (EM) practices. Thus, our goal is to provide a response to the following research questions. Are goodwill impairments used by listed firms’ managers to manipulate earnings? If so, what kind of EM practice is mostly used? Design/methodology/approach – In this paper the authors tested the following hypothesis: H1. In the year of the deal’s closure and in the following four years, the management detects impairment of goodwill in difformity with the previous Italian regulations and related accounting practices. Moreover, the authors tried to determine, for each considered firms, potential symptoms of typical DEM practices widely debated in the financial accounting literature (income smoothing, income minimization, income minimization, or big bath accounting). Findings – Our analysis does not prove evidence of certain EM practices, but it highlights very clearly that, after the adoption of IAS/IFRS, managers’ behavior has deeply changed. Moreover, the analysis shows that there is no univocal choice in favor of a specific EM practice and that every firm pursues its own “strategy.” Originality/value – Considering the importance of the topic from both the perspectives of managerial (with regard to M & As valuation processes) and financial accounting (with regard to intangibles valuation fulfilled by applying the impairment test instead of the amortization), this work aims to provide a multi-dimensional contribution to the current debate.

Cashing-in: understanding post-acquisition CEO stock option exercise

2015 ◽  
Vol 53 (9) ◽  
pp. 1953-1975 ◽  
Author(s):  
John S. Marsh ◽  
William J. Wales ◽  
Rachel Graefe-Anderson ◽  
Marshall W. Pattie
Keyword(s):  
Stock Options ◽  
Design Methodology ◽  
Stock Option ◽  
Exercise Behavior ◽  
Future Research ◽  
Acquisition Performance ◽  
Content Type ◽  
Compensation Management ◽  
Ceo Tenure ◽  
Practical Implications

Purpose – The purpose of this study is to explore post-acquisition compensation management and examine how the two most commonly used theories to explain CEO stock option exercise, agency theory and CEO overconfidence, expect CEOs to manage their stock options following an acquisition. Design/methodology/approach – Using logistic regression analysis, the authors investigate whether CEOs are more or less likely to exercise options following an acquisition, and the effect which CEO tenure and acquisition history may have on option exercise. Findings – The results suggest that CEOs are more likely to exercise options following an acquisition. The authors also find that CEO tenure and acquisition experience are both linked to an increase in option exercise. Research limitations/implications – The findings suggest that future research should expect agency effects to outweigh overconfidence effects when considering CEO stock option exercise behavior within the post-acquisition firm context. Practical implications – This paper advises directors and shareholders about whether agency concerns or overconfidence are of greater concern and how CEO tenure and past acquisition history may influence post-acquisition CEO stock option exercise behavior, offering information valuable in designing effective corporate governance. Originality/value – This paper is among the first to explore how CEOs manage their options following an acquisition and finds that CEOs are more likely to exercise stock options following an acquisition. Post-acquisition compensation management is an important, though overlooked, consideration in improving acquisition performance.

scholarly journals Stock options: do they influence dividend payments?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Janaina Muniz ◽  
Fernando Galdi ◽  
Felipe Storch Damasceno
Keyword(s):  
Stock Options ◽  
Design Methodology ◽  
Performance Metrics ◽  
Positive Association ◽  
Stock Option ◽  
Content Type ◽  
Executive Stock Option ◽  
Dividend Payments ◽  
Remuneration Policy ◽  
The Relationship

Purpose This study aims to investigate whether there is any influence of the option plan to purchase shares protected from dividends to determine the distribution of dividends in Brazilian companies. Design/methodology/approach The authors used a Tobit dynamic and regressive regression model because their sample has an index higher than 30% of companies that do not pay dividends. The sample includes companies that pay dividends or not and pay their executives with executive stock option plans and is composed of 1,990 observations from 356 companies from 2010 to 2016. Findings The results indicated that the presence of a dividend protection clause has a positive association with the distribution of dividends. The authors sought to clarify that companies with a stock option plan protected by the distribution of dividends face fewer restrictions on the distribution of dividends. The authors found that most companies still use only stock options to benefit middle-ranking positions and fit the plan in their remuneration policy. The monitoring of these plans lasts an average of seven years, and specific acquisition conditions are not established with their beneficiaries, who must remain in the company and observe performance metrics. Originality/value This study is relevant because the relationship between dividends and stock options has not yet been analyzed in Brazil, especially concerning a dividend-protected option plan, which is a relatively recent modality, even unknown to some companies.

Understanding knowledge hiding in the context of virtual workplaces

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Suman Choudhary ◽  
Kirti Mishra
Keyword(s):  
Design Methodology ◽  
Virtual Work ◽  
Theory Approach ◽  
Loss Of Control ◽  
Content Type ◽  
Work Arrangements ◽  
Management Literature ◽  
Knowledge Hiding ◽  
Grounded Theory Approach ◽  
Depth Interviews

Purpose This paper aims to explore the implications of virtual work arrangements on employee knowledge hiding (KH) behaviour and the different strategies of KH used by employees in these arrangements. Design/methodology/approach Following a grounded theory approach to understanding KH, 21 semi-structured in-depth interviews were conducted with employees engaged in virtual working setups. The data collected from these informants were then analysed using qualitative methods. Findings The study revealed that virtual work arrangements increase employee KH behaviour because of three reasons: ease of hiding, digital burnout and loss of control. Further, the study found that rationalized hiding is the most commonly adopted strategy by employees engaged in virtual work arrangements, while inclinations towards evasive hiding strategy decrease in this arrangement. Originality/value This is the first study in knowledge management literature that seeks to explain KH in the virtual work context.

Enabling formal MCS design and use: a meta-synthesis of qualitative research

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marc Janka
Keyword(s):  
Qualitative Research ◽  
Design Methodology ◽  
Management Control ◽  
Employee Behavior ◽  
Goal Congruence ◽  
Management Control System ◽  
Content Type ◽  
Daily Work ◽  
Management Literature ◽  
Design Characteristics

Purpose This study aims to synthesize qualitative research in the accounting and management literature that builds on the concept of enabling formalization. The framework for the meta-synthesis integrates formal management control system (MCS) design applying the package typology and two modes of MCS use, namely, diagnostic and interactive. Design/methodology/approach The meta-synthesis is based on 34 case studies gathered by a systematic literature search. Qualitative research mining software (Leximancer) was used to facilitate an initial analysis, upon which an in-depth manual analysis was conducted. Findings The findings indicate that the generic features of enabling formalization – specifically, flexibility and repair – help employees better deal with inevitable contingencies in their daily work through continuous self-improvement. In many circumstances, there is a need to change common organizational practices, which sometimes requires realignment to direct employee behavior toward goal congruence. The (temporary) coercion of employees does not seem to cause dysfunctional behavior or resistance as long as the broader MCS package follows the design features of enabling formalization – specifically, transparency. The interactive use of personnel/cultural controls appears to play a crucial role within the whole MCS package in balancing tensions between coercion and enabling formalization. Originality/value This study adds to the understanding of formal MCS design characteristics perceived by managers and employees as enabling. Furthermore, it shows how managers of these organizations use formal MCS under enabling formalization.

The moderating effect of culture on the relationship between accountability and professional scepticism

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Medhat Endrawes ◽  
Shane Leong ◽  
Kenan M. Matawie
Keyword(s):  
Cultural Values ◽  
Design Methodology ◽  
Middle Eastern ◽  
Cognitive Effort ◽  
Planning Stage ◽  
Content Type ◽  
Big 4 ◽  
Prior Literature ◽  
The Impact ◽  
The Relationship

Purpose This study aims to examine whether accountability and culture have an impact on auditors’ professional scepticism. It also examines whether culture moderates the effect of accountability on auditors’ professional scepticism. Design/methodology/approach Three of the Big 4 firms in Australia and Egypt participated in an audit judgement experiment, which required them to indicate their beliefs about the risk of fraud and error at the planning stage of a hypothetical audit and evaluate the truthfulness of explanations provided by the client management. The authors examined whether their professional scepticism was influenced by accountability. Findings The results indicate professional scepticism differs significantly between cultures in some situations. The fact that culture influences scepticism suggests that even when auditors use the same standards (such as ISA 240 and ISA 600), they are likely to be applied inconsistently, even within the same firm. The authors, therefore, recommend that international bodies issue additional guidance on cultural values and consider these cultural differences when designing or adopting auditing standards. Originality/value To the best of the authors’ knowledge, this is the first study that examines whether culture moderates the impact of accountability on auditors’ professional scepticism using Egyptian and Australian (Middle Eastern and Western) auditors. Prior literature suggests that individuals subject to accountability pressure increase their cognitive effort and vigilance to detect fraud and error. As the authors find evidence that culture moderates accountability pressure and as accountability affects scepticism, they add to the literature suggesting that culture can influence professional scepticism.

Nonprofit expense management and the zero-profit threshold

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Stephanie Monteiro Miller
Keyword(s):  
Earnings Management ◽  
Design Methodology ◽  
Social Implications ◽  
Profit Motive ◽  
Management Behavior ◽  
Content Type ◽  
Nonprofit Firms

Purpose In a wide variety of settings, individuals target round-numbered thresholds, relaxing effort when they are out of reach. This paper aims to investigate whether this phenomenon occurs in nonprofits as well. Design/methodology/approach The paper empirically examines nonprofits’ propensity to cut expenses relative to the attainability of the zero-profit threshold. Findings This paper finds nonprofit firms are more likely to cut expenses when faced with small expected losses than with larger losses, and this pattern varies predictably with incentives to reach the zero-profit threshold. Research limitations/implications This suggests managers are motivated by desire to reach the zero-profit threshold rather than to improve firms’ economic situations, as the propensity to cut expenses is lower when the threshold is out of reach. Social implications Additionally, the results suggest that even the lack of explicit profit motive may not quell earnings management behavior. Originality/value These results begin to close the gap in our understanding of expense management in nonprofit firms, showing how operating expenses can be used to manage earnings.

Outsourcing in startups

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fernanda Kalil Steinbruch ◽  
Bernardo Soares Fernandes ◽  
Leandro da Silva Nascimento ◽  
Paulo Antônio Zawislak
Keyword(s):  
Design Methodology ◽  
Development Stage ◽  
Attractive Alternative ◽  
Content Type ◽  
Core Business ◽  
Secondary Sources ◽  
The Core ◽  
Management Literature ◽  
Structure Knowledge

Purpose The purpose of this paper is to identify the main activities that startups outsource and the elements involved in outsourcing decisions. Design/methodology/approach A multi-case study composed of Brazilian startups was conducted. Data through interviews and secondary sources were obtained. Two groups of startups were considered and analyzed comparatively: startups in the development stage and in the sales stage. Findings The findings show that even though the literature suggests that the core business should not be outsourced, some startups do have to outsource this kind of activity. That was the main difference found between startups in the sales stage and in the development stage: the former group has a solid structure, knowledge and resources, so they can keep the core business inside the firm; whereas the latter group has little experience, scarce knowledge and resources, making outsourcing a more attractive alternative. Originality/value Theoretically, this paper approaches a perspective underexplored in the innovation and management literature: outsourcing in startups. It highlights how outsourcing, as a decision between making and buying, can help startups to improve success potential. In practice, this paper discusses and demonstrates why and what can be outsourced by startups in the development and in the sales stages to overcome their limitations and, consequently, achieve better innovative results.

scholarly journals Gendering expert work and ideal candidacy in Finnish and Estonian job advertisements

2018 ◽  
Vol 33 (7) ◽  
pp. 544-560 ◽  
Author(s):  
Jatta Jännäri ◽  
Seppo Poutanen ◽  
Anne Kovalainen
Keyword(s):  
Design Methodology ◽  
Doing Gender ◽  
Content Type ◽  
Market Structures ◽  
Job Advertisements ◽  
Management Literature ◽  
Global Construction ◽  
Managerial Positions ◽  
Definition Of ◽  
The Ideal

Purpose This paper aims to analyse the ways the textual materials of job advertisements do the gendering for prospective expert positions and create a space for ambiquity/non-ambiquity in the gender labelling of this expertise. Expert positions are almost always openly announced and are important to organizations because they often lead to higher managerial positions. By gendering the prospective positions, the job advertisements bring forth repertoires strengthening the gendering of work and gendered expert employee positions. Design/methodology/approach This study draws on qualitative textual and visual data of open job advertisements for expert positions. The materials of the study are gathered from open job advertisements in two countries, i.e. Finland and Estonia with rather similar labour market structures in relation to gender positions but differing as regards their gender equality. Findings The analyses show that the gendering of expert work takes place in the job advertisements by rendering subtly gendered articulations, yet allowing for interpretative repertoires appear. The analysis reveals some differences in the formulations of the advertisements for expert jobs in the two countries. It also shows that in general the requirements for an ideal expert candidate are coated with superlatives that are gendered in rather stereotypical ways, and that the ideal candidates for highly expert jobs are extremely flexible and follows the ideal of an adaptable and plastic employee, willing to work their utmost. This paper contributes to the “doing gender” literature by adding an analysis of the textual gendering of ideal candidates for positions of expertise. Research limitations/implications The research materials do not expose all the issues pertinent to questions of the ideal gendered candidate. For instance, questions of ethnicity in relation to the definition of the ideal candidate cannot be studied with the data used for this study. Being an exploratory study, the results do not aim for generalizable results concerning job advertisements for expert positions. Originality/value This paper contributes to the “doing gender” and “gendering” literature by addressing the question of how and in what ways gender is defined and done for an expert positions prior the candidates are chosen to those jobs. It also offers new insights into the global construction of gendered expert jobs advertisements by addressing the topic with data from two countries. It further contributes to understanding the gendered shaping of expertise in the management literature.

scholarly journals Developing a conceptual model of influences around integrated reporting, new insights and directions for future research

2017 ◽  
Vol 25 (4) ◽  
pp. 450-460 ◽  
Author(s):  
Charl de Villiers ◽  
Pei-Chi Kelly Hsiao ◽  
Warren Maroun
Keyword(s):  
Conceptual Model ◽  
Research Agenda ◽  
Design Methodology ◽  
Future Research ◽  
Special Issue ◽  
Integrated Reporting ◽  
Theoretical Frameworks ◽  
Content Type ◽  
Prior Literature ◽  
Research Questions

Purpose This paper aims to develop a conceptual model for examining the development of integrated reporting, relate the articles in this Meditari Accountancy Research special issue on integrated reporting to the model and identify areas for future research. Design/methodology/approach The paper uses a narrative/discursive style to summarise key findings from the articles in the special issue and develop a normative research agenda. Findings The findings of the prior literature, as well as the articles in this special issue, support the conceptual model developed in this paper. This new conceptual model can be used in multiple ways. Originality/value The special issue draws on some of the latest developments in integrated reporting from multiple jurisdictions. Different theoretical frameworks and methodologies, coupled with primary evidence on integrated reporting, construct a pluralistic assessment of integrated reporting, which can be used as a basis for future research. The new conceptual model developed in this paper can be used as an organising framework; a way of understanding and thinking about the various influences; a way of identifying additional factors to control for in a study; and/or a way of identifying new, interesting and underexplored research questions.

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