SFAS 123 Stock-Based Compensation Expense and Equity Market Values
- Topics:
- Stock Options
- Tags:
- Benefits,
- Compensation,
- Equity,
- Finance,
- Financial Services,
- Human Resources,
- Investment,
- Social Science Electronic Publishing Inc.,
- Stock
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Overview: The objective of this study is to understand the relation between equity market values and stock-based employee compensation expense that is disclosed, but not recognized in determining net income, under Statement of Financial Accounting Standards (SFAS) No. 123. In particular, it predicts and finds that stock-based compensation expense has a negative relation with share price, consistent with investors viewing it an expense of the firm. This finding calls into question the quality of reported earnings. It also indicates that stock-based compensation expense is measured with sufficient reliability to be reflected in investor's valuation assessments. The tests focus on the relation between share price and stock-based compensation expense, after controlling for net income, book value of equity, and expected future earnings growth.
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Format: PDF | Size: 123KB | Date: Jul 2001 | Pages: 44
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