Option grant vesting terms are a contractual provision that is shaped by accounting standards and other economic factors. We examine the effect of accounting standards, specifically SFAS 123(R), on the vesting terms of stock option grants while also modeling other economic determinants of this contract feature. We document significant variation in stock option grant vesting periods and patterns suggesting that firms actively choose vesting terms. Consistent with financial reporting incentives influencing contract design, we find that firms simultaneously lengthen vesting periods and alter vesting patterns after the adoption of SFAS 123(R). The changes in vesting patterns are consistent with firms trying to defer recognition of the option expense, while limiting the incremental risk imposed on the CEO. In addition, we find that vesting schedules are longer in growth firms where lengthening the executive’s investment horizon is more important and that firms with more powerful CEOs and weaker governance grant options with shorter vesting periods.
Review of Accounting Studies – Springer Journals
Published: Nov 16, 2012
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera