Managers' Forecast Guidance In Earnings Surprises Around Employee Stock Option Reissues

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Managers' Forecast Guidance In Earnings Surprises Around Employee Stock Option Reissues

Show simple item record Park, Jin Dong en_US 2009-09-16T18:19:01Z 2009-09-16T18:19:01Z 2009-09-16T18:19:01Z January 2009 en_US
dc.identifier.other DISS-10296 en_US
dc.description.abstract Option repricing, the practice of canceling underwater options and reissuing options with a lower exercise price, has often been considered an effective mechanism to restore the incentive effects of stock options. Since December 15, 1998, the effective date of FIN No.44, firms have initiated option exchange program as a new form of repricing. Under the new option exchange program, most firms cancel underwater options on a specified date and then reissue options at the first business day that is six months and one day later in order to avoid variable accounting for option repricing. I conjecture that this feature of the option exchange program potentially creates a new agency issue that managers may likely benefit from when a lower stock price results at the option reissue date. Thus, this thesis attempts to explore managers' possible opportunistic actions prior to option reissues from the perspective of earnings surprises. I analyzed earnings surprises and managers' forecast guidance on total 328 option reissues implemented from 2000 to 2005. I find some evidence that managers are more likely to engage in negative earnings surprises prior to `executive' option reissues by guiding analysts' earnings forecasts upward, when the earnings announcement date is closer to the option reissue date. Furthermore, the stock return analysis shows that the abnormal stock return prior to `executive' option reissues is significantly lower than that of `non-executive' option reissues, suggesting that managers probably take some other opportunistic actions to curb or delay stock price increases prior to `executive' option reissues. en_US
dc.description.sponsorship Subramaniam, Chandra en_US
dc.language.iso EN en_US
dc.publisher Accounting en_US
dc.title Managers' Forecast Guidance In Earnings Surprises Around Employee Stock Option Reissues en_US
dc.type Ph.D. en_US
dc.contributor.committeeChair Subramaniam, Chandra en_US Accounting en_US Accounting en_US University of Texas at Arlington en_US doctoral en_US Ph.D. en_US
dc.identifier.externalLinkDescription Link to Research Profiles

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