Economic Consequences of Accounting for Stock-Based Compensation: An Analysis of Investor Perceptions and Corporate Lobbing Behavior
Posted: 29 May 1995
This study investigates the economic consequences of the FASB's 1993 Exposure Draft requiring the expensing of employee stock options. We examine (i) a sample of firms in industries that are intensive users of employee stock options; (ii) a sample of firms in an emerging 'high-tech' industry (biotechnology); and (iii) a sample of firms submitting comment letters to the FASB opposing the expensing of employee stock options. Our results indicate that investors do not share corporate America's concerns that expensing employee stock options would have negative economic consequences. Additional tests show that corporate America's opposition to expensing is concentrated in firms that use options extensively for top executives rather than in firms with high overall levels of option usage.
JEL Classification: M41
Suggested Citation: Suggested Citation