SFAS No. 123 Stock-Based Compensation Expense and Equity Market Values
- 1 April 2004
- journal article
- research article
- Published by American Accounting Association in The Accounting Review
- Vol. 79 (2) , 251-275
- https://doi.org/10.2308/accr.2004.79.2.251
Abstract
This study investigates the relation between share price and stock-based compensation expense that is disclosed but not recognized under SFAS No. 123, after controlling for net income, equity book value, and expected earnings growth. Our instrumental variables approach controls for the mechanical relation between share price and option values. We find that investors view SFAS No. 123 expense as an expense of the firm, and as sufficiently reliable to be reflected in their valuation assessments. Findings based on annual returns indicate SFAS No. 123 expense reflects on a timely basis changes in investor-perceived costs associated with stock-based compensation.This publication has 24 references indexed in Scilit:
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