Accounting for Employee Stock Options: What Can We Learn from the Market's Perceptions?

Bagna, E; Bini, M; Bird, R; Momentè, F; Reggiani, F

Accounting for Employee Stock Options: What Can We Learn from the Market's Perceptions?

Bagna, E Bini, M Bird, R

Momentè, F Reggiani, F

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Publication Type:: Journal Article
Citation:: Journal of International Financial Management and Accounting, 2010, 21 (2), pp. 161 - 186
Issue Date:: 2010-06-01

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Field	Value	Language
dc.contributor.author	Bagna, E	en_US
dc.contributor.author	Bini, M	en_US
dc.contributor.author	Bird, R https://orcid.org/0000-0003-0524-9377	en_US
dc.contributor.author	Momentè, F	en_US
dc.contributor.author	Reggiani, F	en_US
dc.date.issued	2010-06-01	en_US
dc.identifier.citation	Journal of International Financial Management and Accounting, 2010, 21 (2), pp. 161 - 186	en_US
dc.identifier.issn	0954-1314	en_US
dc.identifier.uri	http://hdl.handle.net/10453/14029
dc.description.abstract	The scope of this is paper is to provide new empirical evidence on the value relevance of employee stock options (ESOs) in Europe. We show, empirically, that the market participants when pricing a firm's equity place approximately the same valuation weights on the ESO-deferred compensation expense (the so called " ESO asset" ) and the compensation option liability (the so called " ESO liability" ). Our empirical findings support the theoretical work of Ohlson and Penman who suggest that the deferred compensation expense be treated as a contra-liability. The second contribution of our work rests on the nature of the ESO expense. We show that the distinction between persistent and non-persistent ESO expenses is of critical importance for the market participants. Accordingly, an improved accounting disclosure should assist the investors in assessing the long-term goals of the ESO plans at the firm level. © 2010 Blackwell Publishing Ltd.	en_US
dc.relation.ispartof	Journal of International Financial Management and Accounting	en_US
dc.relation.isbasedon	10.1111/j.1467-646X.2010.01039.x	en_US
dc.subject.classification	Accounting	en_US
dc.title	Accounting for Employee Stock Options: What Can We Learn from the Market's Perceptions?	en_US
dc.type	Journal Article
utslib.citation.volume	2	en_US
utslib.citation.volume	21	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1503 Business and Management	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.issue	2	en_US
pubs.publication-status	Published	en_US
pubs.volume	21	en_US

Abstract:

The scope of this is paper is to provide new empirical evidence on the value relevance of employee stock options (ESOs) in Europe. We show, empirically, that the market participants when pricing a firm's equity place approximately the same valuation weights on the ESO-deferred compensation expense (the so called " ESO asset" ) and the compensation option liability (the so called " ESO liability" ). Our empirical findings support the theoretical work of Ohlson and Penman who suggest that the deferred compensation expense be treated as a contra-liability. The second contribution of our work rests on the nature of the ESO expense. We show that the distinction between persistent and non-persistent ESO expenses is of critical importance for the market participants. Accordingly, an improved accounting disclosure should assist the investors in assessing the long-term goals of the ESO plans at the firm level. © 2010 Blackwell Publishing Ltd.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/14029