The Impact of Executive Pay on the Disclosure of Alternative Earnings Per Share Figures

45 Pages Posted: 17 Sep 2012

See all articles by Colette Grey

Colette Grey

University of Limerick - Kemmy Business School

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School

Martin Walker

University of Manchester - Manchester Business School

Date Written: September 1, 2012

Abstract

This paper investigates the motives for disclosing an alternative Earnings per Share (EPS) figure. In particular, we extend prior findings for the UK (Choi, Lin, Walker & Young, 2007) by highlighting the role of managerial contracting in the alternative EPS disclosure choice. We examine a specific contractual setting where management is especially sensitive to reported earnings numbers, i.e., when EPS performance targets exist in the managerial remuneration package. Our analysis suggests that the choice to disclose an alternative EPS figure is positively related to firms where the vesting of executive share options (ESOs) is contingent on the achievement of growth in EPS. Our results remain significant after testing for selection bias, direction of causality and after matching firms on variables prior literature identifies as influential in the choice of an EPS target as a performance criterion in executive remuneration.

Keywords: accounting choice, earnings per share, transitory items, executive remuneration, share options

JEL Classification: M41, G34

Suggested Citation

Grey, Colette and Stathopoulos, Konstantinos and Walker, Martin, The Impact of Executive Pay on the Disclosure of Alternative Earnings Per Share Figures (September 1, 2012). Available at SSRN: https://ssrn.com/abstract=2147646 or http://dx.doi.org/10.2139/ssrn.2147646

Colette Grey (Contact Author)

University of Limerick - Kemmy Business School ( email )

Limerick
Ireland
+ 353 61 202105 (Phone)
+ 353 61 613188 (Fax)

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School ( email )

AMBS Building
Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 275 6863 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.research.manchester.ac.uk/portal/K.Stathopoulos.html

Martin Walker

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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