Contagion of Accounting Methods: Evidence from Stock Option Expensing

Posted: 6 Jul 2013

Date Written: April 8, 2010

Abstract

I examine how a firm’s accounting methods can be influenced by the choices of other firms, which I label contagion. I model accounting method choice as a combination of intrinsic propensities to adopt a method and contagion effects. I predict contagion of accounting methods occurs for two reasons: (1) adoption decisions of other firms are informative for the adoption decision, and (2) prior adoptions change the net benefits of the decision. I test these predictions in the stock option expensing setting where firms had the choice to use the intrinsic or fair value method. Using a firm-level diffusion model, I document evidence consistent with my predictions.

Keywords: Accounting choice, Contagion, Diffusion, Stock options

JEL Classification: M40, M41

Suggested Citation

Reppenhagen, David A., Contagion of Accounting Methods: Evidence from Stock Option Expensing (April 8, 2010). Review of Accounting Studies, Vol. 15, No. 3, 2010. Available at SSRN: https://ssrn.com/abstract=2290344

David A. Reppenhagen (Contact Author)

UNCC - Turner School of Accountancy ( email )

9201 University City Blvd
Charlotte, NC 28223
United States
7046875394 (Phone)

HOME PAGE: http://https://belkcollege.uncc.edu/directory/david-reppenhagen

Register to save articles to
your library

Register

Paper statistics

Abstract Views
287
PlumX Metrics