Stock option grant vesting terms: economic and financial reporting determinants

• 成果类型: Article
• 署名作者: Cadman, Brian D.; Rusticus, Tjomme O.; Sunder, Jayanthi
• 署名单位: Utah System of Higher Education; University of Utah; Northwestern University; University of Arizona
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-012-9215-6
• 发表日期: 2013
• 页码: 1159-1190
• 关键词: CEO TURNOVER; institutional investors; Equity compensation; INVESTMENT; PROVISIONS; EXERCISES; income; FIRMS

摘要

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.