Does Accounting Regulation Enhance Corporate Governance? Evidence from the Disclosure of Share-Based Remuneration

Journal of Management and Governance, Forthcoming

17 Pages Posted: 30 Jul 2010 Last revised: 31 Oct 2010

Andrea Melis

University of Cagliari

Silvia Carta

University of Cagliari

Date Written: April 6, 2009

Abstract

Accounting for stock options and share-based remuneration is a controversial issue. The purpose of this study is to explore the impact of the mandatory adoption of IFRS 2 on accounting for share-based remuneration by Italian listed companies. The requirements under this standard could have relevant implications for corporate governance as IFRS 2 is expected to reduce the information asymmetry that may exist between corporate insiders and outsiders regarding such remuneration. Empirical evidence confirms that overall disclosure in annual reports concerning the costs of remuneration plans has increased following the adoption of IFRS 2, although some cases of lack of disclosure have also been found. We find that this change in accounting regulation has contributed towards revealing the 'true' cost of share-based remuneration to minority shareholders and other investors, together with some evidence of creative accounting surrounding the substance over form principle.

Keywords: accounting regulation, corporate governance, disclosure, IFRS 2, Italy, share-based remuneration, stock options

JEL Classification: G34, M41

Suggested Citation

Melis, Andrea and Carta, Silvia, Does Accounting Regulation Enhance Corporate Governance? Evidence from the Disclosure of Share-Based Remuneration (April 6, 2009). Journal of Management and Governance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1373938

Andrea Melis (Contact Author)

University of Cagliari ( email )

Dipartimento di Scienze economiche ed aziendali
Viale S. Ignazio 17
Cagliari, 09123
Italy
+39-070-6753302 (Phone)
+39-070-6753321 (Fax)

HOME PAGE: http://people.unica.it/andreamelis

Silvia Carta

University of Cagliari ( email )

I-09123 Cagliari
Italy

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