Disclosure of the Fair Value of Executive Stock Options Granted to Top Executives

37 Pages Posted: 2 Oct 2007

See all articles by Kevin C. K. Lam

Kevin C. K. Lam

Hang Seng Management College; The Chinese University of Hong Kong (CUHK) - School of Accountancy

Yaw M. Mensah

Rutgers Business School - Newark & New Brunswick

Date Written: September 2007

Abstract

This paper examines the determinants of a company's choice of disclosure informativeness. The specific context is the disclosure of the value of stock options granted to the top executives under the SEC's Regulation S-K (Item 403). We show that firms with executives who are excessively paid, poorly-performing firms, and firms which are substantially owned by insiders, are more likely to choose the less informative disclosure method. On the other hand, larger firms, firms which are widely covered by analysts, firms with high financial leverage, and those which voluntarily expense their executive options, are more likely to choose the more informative disclosure. We also provide evidence that firms with higher accounting integrity command a higher market valuation.

Keywords: Employee Stock Options; Regulation S-K, Corporate Governance, Option Expense Disclosure Methods

JEL Classification: M41

Suggested Citation

Lam, Kevin C. K. and Mensah, Yaw M., Disclosure of the Fair Value of Executive Stock Options Granted to Top Executives (September 2007). Available at SSRN: https://ssrn.com/abstract=1018041 or http://dx.doi.org/10.2139/ssrn.1018041

Kevin C. K. Lam

Hang Seng Management College ( email )

Hang Shin Link
Siu Lek Yuen
Shatin, Hong Kong
China

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong

Yaw M. Mensah (Contact Author)

Rutgers Business School - Newark & New Brunswick ( email )

100 Rockafeller Road
Piscataway, NJ 08854
United States
848.445.4369 (Phone)
732.445.0351 (Fax)

HOME PAGE: http://business.rutgers.edu

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