Political Costs and the Fate of the FASB Proposal to Recognize the Costs of Employee Stock Options

Journal of Financial Statement Analysis, Vol. 3, pp. 67-79, Winter 1998

Mays Business School Research Paper No. 2148290

Posted: 18 Sep 2012

See all articles by D. Scott Lee

D. Scott Lee

University of Nevada, Las Vegas - Lee Business School

Donald R. Fraser

Texas A&M University - Department of Finance

Joseph Reising

affiliation not provided to SSRN

Wanda Wallace

College of William and Mary - Mason School of Business

Date Written: September 18, 2012

Abstract

Seven key announcements made during the prolonged debate on the Financial Accounting Standards Board's (FASB) proposal to recognize the effect of all stock-based compensation on earnings are studied. Using several samples of firms involved in the debate, evidence that investors expected no net benefit from the proposed disclosure standards is provided. In fact, the results are consistent with the hypothesis that the proposal posed significant political costs for option-compensated CEOs that were likely to be passed on to shareholders. For some samples, the average share price declines on announcement of the proposal and offsetting average increases on news that the FASB would drop the proposal.

Keywords: taxation, employee stock options

JEL Classification: G38, M41

Suggested Citation

Lee, D. Scott and Fraser, Donald R. and Reising, Joseph and Wallace, Wanda, Political Costs and the Fate of the FASB Proposal to Recognize the Costs of Employee Stock Options (September 18, 2012). Journal of Financial Statement Analysis, Vol. 3, pp. 67-79, Winter 1998, Mays Business School Research Paper No. 2148290, Available at SSRN: https://ssrn.com/abstract=2148290

D. Scott Lee (Contact Author)

University of Nevada, Las Vegas - Lee Business School ( email )

4505 S. Maryland Parkway
Box 456008
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702-895-4630 (Fax)

HOME PAGE: http://faculty.unlv.edu/slee

Donald R. Fraser

Texas A&M University - Department of Finance ( email )

430 Wehner
College Station, TX 77843-4218
United States
979-845- 2020 (Phone)

Joseph Reising

affiliation not provided to SSRN ( email )

Wanda Wallace

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757-221-2907 (Phone)
757-221-2937 (Fax)

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