Prior research generally finds that firms underreport option expense by managing assumptions underlying option valuation (e.g. they shorten the expected option lives), but it fails to document management of a key assumption, the one concerning expected stock-price volatility. Using a new methodology, we address two questions: (1) To what extent do companies follow the guidance in FAS 123 and use forward looking information in addition to the readily available historical volatility in estimating expected volatility? (2) What determines the cross-sectional variation in the reliance on forward looking information? We find that firms use both historical and forward-looking information in deriving expected volatility. We also find, however, that the reliance on forward-looking information is limited to situations where this reliance results in reduced expected volatility and thus smaller option expense. We interpret this finding as managers opportunistically use the discretion in estimating expected volatility afforded by FAS 123. In support of this interpretation, we also find that managerial incentives play a key role in this opportunism.
{"title":"Stock Option Expense, Forward-Looking Information, and Implied Volatilities of Traded Options","authors":"Eli Bartov, Partha Mohanram, Doron Nissim","doi":"10.2139/ssrn.510042","DOIUrl":"https://doi.org/10.2139/ssrn.510042","url":null,"abstract":"Prior research generally finds that firms underreport option expense by managing assumptions underlying option valuation (e.g. they shorten the expected option lives), but it fails to document management of a key assumption, the one concerning expected stock-price volatility. Using a new methodology, we address two questions: (1) To what extent do companies follow the guidance in FAS 123 and use forward looking information in addition to the readily available historical volatility in estimating expected volatility? (2) What determines the cross-sectional variation in the reliance on forward looking information? We find that firms use both historical and forward-looking information in deriving expected volatility. We also find, however, that the reliance on forward-looking information is limited to situations where this reliance results in reduced expected volatility and thus smaller option expense. We interpret this finding as managers opportunistically use the discretion in estimating expected volatility afforded by FAS 123. In support of this interpretation, we also find that managerial incentives play a key role in this opportunism.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"69 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127489687","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We review research from the 1990s that examines the determinants and consequences of accounting choice, structuring our analysis around the three types of market imperfections that influence managers? choices: agency costs, information asymmetries, and externalities affecting noncontracting parties. We conclude that research in the 1990s made limited progress in expanding our understanding of accounting choice because of limitations in research design and a focus on replication rather than extension of current knowledge. We discuss opportunities for future research, recommending the exploration of the economic implications of accounting choice by addressing the three different reasons why accounting matters.
{"title":"Empirical Research on Accounting Choice","authors":"Thomas D. Fields, Thomas Z Lys, Linda Vincent","doi":"10.2139/ssrn.258519","DOIUrl":"https://doi.org/10.2139/ssrn.258519","url":null,"abstract":"We review research from the 1990s that examines the determinants and consequences of accounting choice, structuring our analysis around the three types of market imperfections that influence managers? choices: agency costs, information asymmetries, and externalities affecting noncontracting parties. We conclude that research in the 1990s made limited progress in expanding our understanding of accounting choice because of limitations in research design and a focus on replication rather than extension of current knowledge. We discuss opportunities for future research, recommending the exploration of the economic implications of accounting choice by addressing the three different reasons why accounting matters.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134308954","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Cost allocation issues have befuddled management around the world for over a century. And, because of "informational asymmetries" and agency conflicts between operating management and headquarters, there is no clear theoretical solution to the problem. Nevertheless, there are good reasons for allocating costs. If properly structured, transfer-pricing schemes can serve the same purpose as a market price. By communicating useful information about the relative scarcity of resources within an organization, they can serve to balance supply and demand for the product or service being priced. 1997 Morgan Stanley.
{"title":"The End of Cost Allocations as We Know Them","authors":"Marc Hodak","doi":"10.2139/ssrn.728524","DOIUrl":"https://doi.org/10.2139/ssrn.728524","url":null,"abstract":"Cost allocation issues have befuddled management around the world for over a century. And, because of \"informational asymmetries\" and agency conflicts between operating management and headquarters, there is no clear theoretical solution to the problem. Nevertheless, there are good reasons for allocating costs. If properly structured, transfer-pricing schemes can serve the same purpose as a market price. By communicating useful information about the relative scarcity of resources within an organization, they can serve to balance supply and demand for the product or service being priced. 1997 Morgan Stanley.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1997-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124288915","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Giuseppe Cerboni (1827-1917) in 1861 stated as an accountant with his report on the military condition of Tuscany, proposing a model of "returns of accounts", arousing particular interest and broad consensus. Years of study and experience led him to the development of new accounting concepts, that he transposed in a succession of works among which "Accounting Science" and "Double Entry synoptic." This system of accounts, for which Tommaseo suggested the name Logismografia, consisted in keeping two sets of parallel scriptures which considered each transaction in two different ways, in one was reported the prediction of the annual budget, in the other the relationship with inventory sheet.
Giuseppe Cerboni(1827-1917)在1861年以会计身份发表的托斯卡纳军事状况报告中，提出了“账目回报”模型，引起了人们的特别关注和广泛共识。多年的学习和经验使他发展了新的会计概念，并将其转化为一系列的作品，其中包括《会计学》和《复式记账法》。托马西奥建议把这种记帐系统称为Logismografia，它包括保存两套平行的经卷，从两种不同的角度来考虑每笔交易，一套是对年度预算的预测，另一套是与存货清单的关系。
{"title":"Giuseppe Cerboni: General Accountant of the State","authors":"Danilo Stentella","doi":"10.2139/ssrn.2714583","DOIUrl":"https://doi.org/10.2139/ssrn.2714583","url":null,"abstract":"Giuseppe Cerboni (1827-1917) in 1861 stated as an accountant with his report on the military condition of Tuscany, proposing a model of \"returns of accounts\", arousing particular interest and broad consensus. Years of study and experience led him to the development of new accounting concepts, that he transposed in a succession of works among which \"Accounting Science\" and \"Double Entry synoptic.\" This system of accounts, for which Tommaseo suggested the name Logismografia, consisted in keeping two sets of parallel scriptures which considered each transaction in two different ways, in one was reported the prediction of the annual budget, in the other the relationship with inventory sheet.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125881093","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.1504/IJAAPE.2005.009595
Mark W. Hale, Ryan Huston, Murphy D. Smith
This research study examines perceptions regarding the trustworthiness and integrity of the accounting profession. Perceptions were obtained from accounting practitioners, accounting educators, and future practitioners (students). Survey results indicate that, compared to accounting practitioners and educators, students are generally more concerned about events surrounding the Sarbanes-Oxley Act and feel a stronger need for changes to enhance confidence in the capital markets. Concerning the future of the accounting profession, significant differences of opinion exist among groups. Public accountants are the most optimistic about the future, followed by students, then faculty and industry accountants.
{"title":"The Once and Future Accountant: Ethics and the Future Outlook of the Us Accounting Profession","authors":"Mark W. Hale, Ryan Huston, Murphy D. Smith","doi":"10.1504/IJAAPE.2005.009595","DOIUrl":"https://doi.org/10.1504/IJAAPE.2005.009595","url":null,"abstract":"This research study examines perceptions regarding the trustworthiness and integrity of the accounting profession. Perceptions were obtained from accounting practitioners, accounting educators, and future practitioners (students). Survey results indicate that, compared to accounting practitioners and educators, students are generally more concerned about events surrounding the Sarbanes-Oxley Act and feel a stronger need for changes to enhance confidence in the capital markets. Concerning the future of the accounting profession, significant differences of opinion exist among groups. Public accountants are the most optimistic about the future, followed by students, then faculty and industry accountants.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116502676","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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