Faithin Omaha eBook Collection

Download or read book The Earnings Quality Consequences of Announcements to Voluntarily Adopt the Fair Value Method of Accounting for Stock-Based Compensation* written by Shilpa Manaktala and published by . This book was released on 2017 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Between July and December, 2002, 150 firms announced plans to voluntarily adopt the fair value method of accounting for stock-based compensation. We investigate whether such announcements increased the quality of these firms' earnings as perceived by market participants. Using two measures of earnings quality, the price/earnings relation and the earnings response coefficient, we find evidence consistent with an increase in earnings quality for these firms relative to a control set of firms that in 2002 did not announce plans to adopt the SFAS 123 stock-based compensation recognition provisions.