Evidence on differences between Recognition and Disclosure: A Comparison of Inputs to Estimate Fair Values of Employee Stock Options

48 Pages Posted: 7 Dec 2006 Last revised: 22 Feb 2012

See all articles by Preeti Choudhary

Preeti Choudhary

University of Arizona, Eller College of Management

Date Written: July 20, 2010

Abstract

I investigate reliability differences across recognition and disclosure regimes to shed light on differing incentives and reporting of employee stock option (ESO) fair values. I compare ESO fair values based on firm-reported inputs with ESO fair values based on benchmark inputs, estimated following authoritative guidance. On average, I find opportunism increases with recognition as compared with disclosure, and that it is associated with incentives to manage earnings. Despite the increase in opportunism, I find that accuracy does not decline for recognizers, and that accuracy differs across voluntary and mandatory recognition.

Keywords: reliability, input assumptions, FAS 123, FAS 123-R, recognition, disclosure

JEL Classification: J33, M41, M44, M45

Suggested Citation

Choudhary, Preeti, Evidence on differences between Recognition and Disclosure: A Comparison of Inputs to Estimate Fair Values of Employee Stock Options (July 20, 2010). Available at SSRN: https://ssrn.com/abstract=945398 or http://dx.doi.org/10.2139/ssrn.945398

Preeti Choudhary (Contact Author)

University of Arizona, Eller College of Management ( email )

School of Accountancy
Tucson, AZ 85721
United States

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