Economic Consequences of Accounting for Stock-Based Compensation: An Analysis of Investor Perceptions and Corporate Lobbing Behavior

Posted: 29 May 1995

See all articles by Patricia M. Dechow

Patricia M. Dechow

University of Southern California - Leventhal School of Accounting; University of California, Berkeley - Accounting Group

Richard G. Sloan

University of Southern California - Leventhal School of Accounting

Amy P. Hutton

Boston College - Carroll School of Management

Abstract

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

Dechow, Patricia M. and Sloan, Richard G. and Hutton, Amy P., Economic Consequences of Accounting for Stock-Based Compensation: An Analysis of Investor Perceptions and Corporate Lobbing Behavior. Available at SSRN: https://ssrn.com/abstract=55484

Patricia M. Dechow (Contact Author)

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

University of California, Berkeley - Accounting Group ( email )

Haas School of Business
Berkeley, CA 94720
United States

Richard G. Sloan

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

Amy P. Hutton

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617 552 1951 (Phone)

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