Stock option compensation and the likelihood of meeting analysts' quarterly earnings targets

被引：20
作者：
Bauman M.P. [1 ]
Shaw K.W. [2 ]
机构：
[1] School of Business Administration, University of Northern Iowa
[2] College of Business, University of Missouri
来源：
Review of Quantitative Finance and Accounting | 2006年 / 26卷 / 3期
关键词：
Stock Option; Earning Forecast; Executive Compensation; Earning Surprise; Quarterly Earning;
D O I：
10.1007/s11156-006-7435-1
中图分类号：
学科分类号：
摘要：
One role of stock options in executive compensation packages is to counterbalance the inherently short-term orientation of base salary and annual bonuses. Managerial compensation plans frequently include stock options in order to better align the interests of managers and outside shareholders and reduce agency problems. However, since option values are sensitive to fluctuations in stock prices, and investors reward firms that meet or exceed earnings expectations, executives of firms with sizable option components in their compensation plans have increased incentives to report earnings that meet or exceed analysts' forecasts. We show that the propensity to meet or exceed analysts' quarterly earnings forecasts is positively related to the use of options in top executives' compensation plans. Further, firms that employ relatively more options in their compensation plans more frequently report earnings surprises that exceed analysts' forecast by small amounts (between 0 and 1 cent per share). These results suggest that the use of stock-based compensation intensifies top executives' focus on financial analysts' short-term earnings forecasts. © Springer Science + Business Media, Inc. 2006.
引用
收藏
页码：301 / 319
页数：18
相关论文
共 37 条
  • [1] Aboody D., Kasznik R., CEO stock option awards and the timing of corporate voluntary disclosures, Journal of Accounting and Economics, 29, 1, pp. 73-100, (2000)
  • [2] Ali A., Kallapur S., Securities price consequences of the private securities litigation reform act of 1995 and related events, The Accounting Review, 76, 3, pp. 431-461, (2001)
  • [3] Baber W., Kang S., The impact of split adjusting on analysts' forecast error calculations, Accounting Horizons, 16, pp. 277-289, (2002)
  • [4] Barton J., Simko P.J., The balance sheet as an earnings management constraint, The Accounting Review, 77, SUPPL., pp. 1-27, (2002)
  • [5] Bartov E., Givoly D., Hayn C., The rewards to meeting or beating earnings expectations, Journal of Accounting and Economics, 33, 2, pp. 173-204, (2002)
  • [6] Bowen R., DuCharme L., Shores D., Stakeholders' implicit claims and accounting method choice, Journal of Accounting and Economics, 20, 3, pp. 255-295, (1995)
  • [7] Bowen R., Rajgopal S., Venkatachalam M., Accounting discretion, corporate governance, and firm performance, Working Paper, (2004)
  • [8] Brown K., Wall street plays numbers game with earnings, despite reforms, Wall Street Journal, JULY 22, (2003)
  • [9] Brown L., Forecast selection when all forecasts are not equally recent, International Journal of Forecasting, 7, 3, pp. 349-356, (1991)
  • [10] Brown L., A temporal analysis of earnings surprises: Profits versus losses, Journal of Accounting Research, 39, 2, pp. 221-242, (2001)
1234