Contagion of accounting methods: evidence from stock option expensing

Contagion of accounting methods: evidence from stock option expensing I examine how a firm’s accounting methods can be influenced by the choices of other firms, which I label contagion. I model accounting method choice as a combination of intrinsic propensities to adopt a method and contagion effects. I predict contagion of accounting methods occurs for two reasons: (1) adoption decisions of other firms are informative for the adoption decision, and (2) prior adoptions change the net benefits of the decision. I test these predictions in the stock option expensing setting where firms had the choice to use the intrinsic or fair value method. Using a firm-level diffusion model, I document evidence consistent with my predictions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Contagion of accounting methods: evidence from stock option expensing

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Publisher
Springer Journals
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-010-9128-1
Publisher site
See Article on Publisher Site

Abstract

I examine how a firm’s accounting methods can be influenced by the choices of other firms, which I label contagion. I model accounting method choice as a combination of intrinsic propensities to adopt a method and contagion effects. I predict contagion of accounting methods occurs for two reasons: (1) adoption decisions of other firms are informative for the adoption decision, and (2) prior adoptions change the net benefits of the decision. I test these predictions in the stock option expensing setting where firms had the choice to use the intrinsic or fair value method. Using a firm-level diffusion model, I document evidence consistent with my predictions.

Journal

Review of Accounting StudiesSpringer Journals

Published: Apr 8, 2010

References

  • The role of tax regulation and compensation contracts in the decision to voluntarily expense employee stock options
    Blacconiere, W; Johnson, M; Lewis, M
  • Stakeholders implicit claims and accounting method choice
    Bowen, R; DuCharme, L; Shores, D

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