The effects of financial reporting costs on the use of employee stock options

Article Abstract:

A study is conducted to test the hypothesis that the existing financial accounting rules governing employee stock options (ESOs) have an impact on the compensation practices of some companies. Specifically, it seeks to determine whether the current accounting regime for ESOs allows these employee benefits to be used as part of a company's income management strategy. The study uses data obtained from a sample of 123 firms from 1979 to 1989, and employs a poled cross-sectional, time series analysis. Results show that the value of ESOs is negatively related to the extent that the company is below its desired income level, but is positively related to the firm's adoption of accounting methods that can boost income. Findings also suggest that the use of ESOs in some companies is likely to decline if the proposed change in the current financial reporting treatment of these benefits is implemented.

Accounting and auditing, Compensation management, Financial management, Employee stock options

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Reputation formation for reliable reporting: an experimental investigation

Article Abstract:

An experimental study was conducted to examine the extent to which information senders build reputations for truthful reporting. It investigated the different reporting strategies of information senders and the consequent reactions of information receivers to the reports. Findings revealed that senders have a greater tendency to make truthful reports when their misrepresentations incurred costs on the receivers of their reports. Receivers of these reports were able to detect the reporting strategies of the senders after repeated interactions. However, they did not offer any economic reward for truthful reporting. The results of the experiment bolster prior research that used naturally occurring markets which shows that not all firms develop reputations for timely and reliable reporting.

Economic aspects, Corporate image, Truthfulness and falsehood

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Articulation problems between the balance sheet and the funds statement

Article Abstract:

The change in balance sheet amounts as derived from comparative balance sheets and the change that is reported in the funds statement can create two types of discrepancies. The possible discrepancies and their causes. Disclosure policies that would overcome the reporting deficiencies are examined.

Usage, Accounting

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