The Economic Consequences of Accelerated Vesting of Employee Stock Options

Investment Management and Financial Innovation, Vol. 7, No. 4, 2010

16 Pages Posted: 9 Jan 2011

See all articles by Jennifer Li

Jennifer Li

Brock University

Fayez A. Elayan

Brock University-Goodman School of Business

Thomas O. Meyer

Southeastern Louisiana University - Department of Marketing and Finance

Parunchana Pacharn

Brock University

Date Written: 2010

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

JEL Classification: M41

Suggested Citation

Li, Jennifer and Elayan, Fayez A. and Meyer, Thomas Otto and Pacharn, Parunchana, The Economic Consequences of Accelerated Vesting of Employee Stock Options (2010). Investment Management and Financial Innovation, Vol. 7, No. 4, 2010, Available at SSRN: https://ssrn.com/abstract=1736135

Jennifer Li

Brock University ( email )

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

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)

Parunchana Pacharn

Brock University ( email )

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

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