Compensation Contract Adjustments and the Economic Consequences of Financial Reporting in Response to FAS 123R: Accelerated Vesting of Employee Stock Options

33 Pages Posted: 10 Jan 2009  

Fayez A. Elayan

Brock University-Goodman School of Business

Thomas O. Meyer

Southeastern Louisiana University - Department of Marketing and Finance

Jennifer Li

Brock University

Date Written: January 9, 2009

Abstract

Do mandated changes in accounting policy result in the reapportionment of executive equity compensation? Specifically, is this true for firms accounting for employee stock options (ESOs) under FAS 123R? This research addresses how this policy change motivated firms to substitute restricted stock awards (RSAs) and other non-option compensation for ESOs. Accelerating firms that overweighted options in their compensation structure are shown to utilize the implementation of FAS 123R as a deadline to reduce ESOs relative to RSAs. The evidence does not indicate that accelerating firms are managing option expense recognition in an effort to minimize management option compensation costs.

Keywords: Accelerating, Vesting, Employee Stock Options, FAS 123R

JEL Classification: M41

Suggested Citation

Elayan, Fayez A. and Meyer, Thomas O. and Li, Jennifer, Compensation Contract Adjustments and the Economic Consequences of Financial Reporting in Response to FAS 123R: Accelerated Vesting of Employee Stock Options (January 9, 2009). CAAA Annual Conference 2009 Paper. Available at SSRN: https://ssrn.com/abstract=1325605 or http://dx.doi.org/10.2139/ssrn.1325605

Fayez A. Elayan (Contact Author)

Brock University-Goodman School of Business ( email )

1812 Sir Issac Brock Way
St. Catharines, Ontario L2S 3A1
Canada
905-688-5550 (Phone)
905-688-9779 (Fax)

HOME PAGE: http://www.brocku.ca

Thomas Otto Meyer

Southeastern Louisiana University - Department of Marketing and Finance ( email )

SLU 10844
Hammond, LA 70402
United States
985-549-3103 (Phone)
985-549-5010 (Fax)

Jingyu Li

Brock University ( email )

500 Glenridge Avenue
St. Catherines, Ontario L2S 3A1
Canada

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