CEO stock option awards and the timing of corporate voluntary disclosures

Aboody, David; Kasznik, Ron

doi:10.1016/s0165-4101(00)00014-8

Cited by 923 publications

(575 citation statements)

References 23 publications

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“…• capital market transactions, by reducing the cost of capital-e.g., [35][36][37]; • corporate control, by affecting the managers' turnover-e.g., [38,39]; • stock-based compensation plans, by correcting potential undervaluation-e.g., [40]; • development of litigation hypotheses, in turn impacting on the disclosure behaviors-e.g., [41,42]; • managers' recognition, spreading their talent-e.g., [43]; • competition in product markets, which is the only hypothesis assuming the absence of conflict of interest between management and ownership-see [13,44].…”

Section: Corporate Disclosure and Capital Markets: A Brief Literaturementioning

confidence: 99%

Corporate Disclosure, Materiality, and Integrated Report: An Event Study Analysis

2017

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Within the extensive literature investigating the impacts of corporate disclosure in supporting the sustainable growth of an organization, few studies have included in the analysis the materiality issue referred to the information being disclosed. This article aims to address this gap, exploring the effect produced on capital markets by the publication of a recent corporate reporting tool, Integrated Report (IR). The features of this tool are that it aims to represent the multidimensional impact of the organization's activity and assumes materiality as a guiding principle of the report drafting. Adopting the event study methodology associated with a statistical significance test for categorical data, our results verify that an organization's release of IR is able to produce a statistically significant impact on the related share prices. Moreover, the term "integrated" assigned to the reports plays a significant role in the impact on capital markets. Our findings have beneficial implications for both researchers and practitioners, adding new evidence for the IR usefulness as a corporate disclosure tool and the effect of an organization's decision to disclose material information.

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Section: Corporate Disclosure and Capital Markets: A Brief Literaturementioning

confidence: 99%

Corporate Disclosure, Materiality, and Integrated Report: An Event Study Analysis

2017

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“…Thus, insider ownership can be seen as a way to constrain the opportunistic behavior of managers, so the level of discretionary accruals is predicted to be negatively associated to insider ownership (Wartfield et al 1995). However, excessive internal ownership may also have an adverse effect on the company, because the higher power of the managers could lead them to take accounting decisions that reflect personal reasons, so affecting the goal of maximizing the value of the company (Yermack 1997;Aboody and Kaznik 2000). Machuga and Teitel (2009) analyze earnings quality surrounding the implementation of Code of Best Corporate Practices for a sample of Mexican listed companies, and find that firms with internal ownership show a greater earnings quality compared to those that do not have managerial ownership.…”

Section: Internal Ownershipmentioning

confidence: 99%

Does Corporate Governance Influence Earnings Management in Latin American Markets?

2013

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Although US and European research has documented improvement in earnings quality associated with corporate governance characteristics, the situation in Latin America is questionable, given the business environment in which firms operate, which is characterized by controlling family ownership and weak legal protection. The purpose of this study is to examine the relation between the internal mechanisms of Corporate Governance and Earnings Management measured by discretionary accrual. We use a sample of listed Latin American non-financial companies from the period 2006-2009. Our results show how in the Latin American context the role of external directors is limited and that Boards which meet more frequently take a more active position in the monitoring of insiders, so showing a lower use of manipulative practices. In addition, we find a non-linear relation between insider ownership and discretionary accruals, also pointing to the fact that ownership concentration may be a manipulative practices constrictor mechanism only when the ownership of main shareholders is moderate. The findings have important policy implications since this is, to the best of our knowledge, the first study to analyze the relation between the effectiveness of the government and the earnings management behavior. As policy implications, we document how when a country implements controls aimed at reducing corruption, strengthening the rule of law or improving the effectiveness of government, this leads to a reduction in firm earnings management.

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“…Data from earnings surprises provide further evidence consistent with this hypothesis; positive surprises are more likely to occur when earnings are announced after option awards, with the opposite holding for announcements preceding option awards. In addition, Aboody and Kasznick (2000) study a sample of 2,039 stock option awards in the period 1992-1996 to CEOs of 572 firms with a fixed award schedule. They hypothesize that CEOs time their voluntary disclosures around dates of fixed award schedules to increase their stock option compensation.…”

Section: Prior Researchmentioning

confidence: 99%

Private Information, Earnings Manipulations, and Executive Stock-Option Exercises

Bartov

Mohanram

2004

The Accounting Review

374

163

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This paper investigates the decision by top-level executives of more than 1,200 public corporations to exercise large stock option awards in the period 1992-2001. We hypothesize and find that abnormally large option exercises predict stock return future performance. We then hypothesize that this predictive ability represents private information about disappointing earnings in the post-exercise period. Consistent with this hypothesis we find that abnormally positive earnings performance in the pre-exercise period turns to disappointing earnings performance in the post-exercise period, and that this pattern comes as a surprise to even sophisticated market participants (financial analysts). We also hypothesize and find that the disappointing earnings in the post-exercise period represent a reversal of inflated earnings in the pre-exercise period. Collectively, these findings suggest that the private information used by top-level executives to time abnormally large exercises follows from earnings management so as to increase the cash payout of exercises.

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CEO stock option awards and the timing of corporate voluntary disclosures

Cited by 923 publications

References 23 publications

Corporate Disclosure, Materiality, and Integrated Report: An Event Study Analysis

Corporate Disclosure, Materiality, and Integrated Report: An Event Study Analysis

Does Corporate Governance Influence Earnings Management in Latin American Markets?

Private Information, Earnings Manipulations, and Executive Stock-Option Exercises

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