外文翻譯--股票期權(quán)獎勵與盈余管理動機

1、外文翻譯-股票期權(quán)獎勵與盈余管理動機 本科畢業(yè)論文設(shè)計外 文 翻 譯原文：Stock Option Compensation and EarningsManagement IncentivesThis study focuses on the relation between the structure of executive compensation and incentives to manage reported earnings. Specifically, we examine whether the use of stock options relative to other f

2、orms of pay influences discretionary accrual choices around option award dates. We conduct this study in part because of the apparent trend over the past two decades toward the use of options in executive pay. Compensation research has consistently shown that option awards, measured on a fair value

3、basis, now represent on average the largest component of CEO pay Murphy 1999; Baker 1999; Matsunaga 1995; Yermack 1995 . Not surprisingly, this trend seems to have contributed to increased scrutiny of CEO pay and to have led directly to several public policy initiatives during the 1990s.For example,

4、 accounting standard setters adopted a series of rules that greatly expanded investor reporting requirements on options SEC 1992, 1993; FASB 1995 , and, in 1993, Congress enacted tax legislation intended to curb nonperformance-based executive pay see Reitenga et al. 2002; Perry and Zenner 2001 . Fur

5、thermore, as reported in the financial press, criticism of the magnitude of option awards, including criticism by investors, seems to occur regularly ll 1997; Jereski 1997; Fox 2001; Colvin 2001 . Standard setters and politicians are currently reexamining disclosure rules, offering evidence that opt

6、ions continue to be a difficult public policy issue Schroeder 2001; Hamburger and Whelan 2002; WSJ 2002 .Until recently, academic research has typically focused on testing the use of options within an agency theory framework, primarily examining incentive alignment aspects. Arguably, by tying execut

7、ive pay to stock price outcomes, options encourage managers to make operating and investing decisions that imize shareholder wealth Jensen and Meckling 1976 . Though results are mixed, the empirical evidence on options as a component of executive pay has generally supported such agency-based predict

8、ions. However, other studies document unexpected effects on the firm as well, including surprising evidence that awarding options can induce opportunistic behavior by management. The line of research most relevant for our study is one that suggests that managers manipulate the timing of news release

9、s or option award dates or both as a means of increasing the fair value of their awards. For example, Aboody and Kasznik 2000 report evidence indicating that managers time the release of voluntary disclosures, both good and bad news, around award dates in order to increase the value of the options a

10、warded. Since the exercise price of the option is typically set equal to the share price on award date, managers can conceivably increase their option compensation by releasing bad news before the award date. Consistent with this reasoning, Chauvin and Shenoy 2001 find that stock prices tend to decr

11、ease prior to option grants, while Yermack 1997 finds that stock prices tend to increase following option grants. The former effect would typically decrease the exercise price of the option at award date. The latter would increase the option's intrinsic value afterward.One way managers can influ

12、ence the stock price of the firm is to manipulate reported performance Subramanyam 1996 . We argue that the evidence in Aboody and Kasznik regarding voluntary disclosures in general implies that there could also be an incentive to manage reported earnings. We extend Aboody and Kasznik by examining w

13、hether option compensation creates incentives for CEOs to actively intervene not only in the timing of voluntary disclosure, but in the financial reporting process as well. We predict that managers receiving a relatively large portion of their compensation in the form of options will use discretiona

14、ry accruals to report lower operating performance hoping to temporarily suppress stock prices.In addition to addressing the concerns of policymakers, our research is motivated by the fact that while a good deal of research has examined the role of bonus plans in motivating managers' self-interes

15、ted behavior e.g., Healy 1985; Lambert and Larcker 1987; Lewellen et al. 1987; Gaver et al. 1995; Holthausen et al. 1995; Reitenga et al. 2002 , relatively little published research investigates how stock option compensation influences such behavior. Our study could provide insight on whether standa

16、rd option compensation practice influences the quality of reported earnings.To conduct our study, we examine compensation and firm performance data on 168 firms during the time period 1992-98. We obtain data from a variety of sources, including Compustat, the Wall Street Journal annual survey of exe

17、cutive compensation and proxy statements. We estimate a model of the discretionary accruals component of reported annual earnings as a function of several factors including 1 the ratio of option compensation to other forms of pay and 2 the timing of annual earnings announcements and award dates. As

18、predicted, we find evidence that option awards influence the financial reporting process. Firms that compensate their executives with greater shares of options relative to other forms of pay appear to use discretionary accruals to decrease current earnings. Furthermore, this effect appears to be str

19、onger if the executive announces earnings prior to an option award date. Our results extend previous research by documenting that managers appear to intervene in the financial reporting process in an attempt to increase the value of their awards.The rest of our paper is structured as follows. In Sec

20、tion 2, we develop our research hypotheses. Section 3 describes our research design, and Section 4 presents our main results and details on sensitivity tests. Finally, Section 5 discusses these results and their implications for executive compensation practices.Based on previous studies and our own

21、review of proxy statements, it appears that the process of awarding options follows a standard pattern Yermack 1997; Aboody and Kasznik 2000 . Awards are formally determined by a compensation committee of the board of directors and are nearly always made once per year, typically with an exercise pri

22、ce equal to share price on award date.As noted in the introduction, most of the academic research on the use of stock options has used an agency theory framework, approaching the structure of executive pay as a solution to various agency problems. Early research such as DeFusco et al. 1990 and Yerma

23、ck 1995 yielded mixed results, leaving significant unanswered questions about the prevalence of options. Perhaps because of better data availability, recent agency-based research has provided more consistent results. For example, studies by Core et al. 1999 , Core and Guay 1999 , and Bryan et al. 20

24、00 appear to support the theory that executive pay structure in general, and the use of options in particular, reflects firms' agency costs.However, other lines of research on options indicate that executive compensation practices could produce unintended consequences for the firm. For example,

25、Lambert et al. 1989 find that firms exhibit lower than predicted dividend payment levels after adopting executive stock option plans. Because the payoff on an option is determined by stock price appreciation rather than total shareholder return appreciation plus dividends , dividend reduction increa

26、ses option value. While apparently good for option-holding executives, such a dividend policy might not be fully anticipated by, or in the best interests of, shareholders. Pursuing a similar argument, Jolls 1996 finds that stock repurchases tend to replace cash dividends as executive option holdings

27、 increase. In addition, the line of research that we extend documents that manipulation of voluntary disclosures and/or award dates could increase the value of option compensation. Taken together, the evidence suggests that while option compensation practices are likely to mitigate some types of age

28、ncy costs, the same practices might induce other forms of opportunistic behavior. We discuss these findings in more detail along with other relevant research on earnings management below.Prior research suggests that managers manipulate earnings to achieve a variety of objectives, including "inc

29、ome smoothing" Gaver et al. 1995; DeFond and Park 1997 , long-term bonus imization Healy 1985 , avoidance of technical default of debt covenants Dichev and Skinner 2001 , and avoidance of losses and declines in earnings Burgstahler and Dichev 1997 . Murphy 1999 suggests that option compensation

30、 and outright stock ownership by managers give rise to divergent incentives, with stock ownership focusing managers' efforts on achieving higher total shareholder returns and options rewarding only share price appreciation relative to the exercise price. Several empirical studies provide support

31、 for these predictions Lambert et al. 1989; Lewellen et al. 1987 . We conjecture that these divergent incentives could motivate managers to manipulate earnings up or down as a function of compensation structure and other factors.As an example, Matsunaga 1995 argues that, when firms are under financi

32、al distress, they attempt to reduce compensation expense by substituting options for bonus pay. Matsunaga also finds that income-increasing accounting policy choices are positively related to option awards. By extension, this result could imply a positive relation between income-increasing discretio

33、nary accruals and option compensation. However, Matsunaga examines only the associations between options and various financial characteristics of the firm, and his analysis does not directly examine any earnings management incentives related to option compensation.In a paper that directly addresses

34、the association between voluntary disclosure and option compensation, Aboody and Kasznik 2000 find that managers opportunistically time the release of good and bad news in order to increase the value of their option awards. Their study provides evidence that managers receiving options prior to earni

35、ngs announcements are more likely to issue preemptive "bad news" voluntary disclosures as opposed to mandatory earnings announcements prior to the option award. This evidence indicates that by positioning such disclosures in advance of an award date, managers in their sample are able to in

36、crease the value of option awards by an average of 16 percent. Consistent with this evidence, Chauvin and Shenoy 2001 find that stocks exhibit abnormal negative returns leading up to award dates, while Yermack 1997 finds abnormal positive returns following awards, Aboody and Kasznik also document th

37、at returns in the period immediately surrounding the earnings announcements are lower for those firms awarding options prior to the earnings announcement than for those awarding options after the earnings announcement. These results suggest that, all else equal, firms disclosing earnings prior to th

38、e award date might report lower earnings relative to those firms disclosing earnings after the award date.In contrast to Aboody and Kasznik 2000 and Chauvin and Shenoy 2001 , Yermack 1997 concludes that the timing of an option award is conditional on the favorability of earnings announcements. Speci

39、fically, managers tend to receive options prior to after the release of favorable unfavorable earnings announcements. The author interprets these results as evidence that managers benefit from opportunistic timing of option awards.Similar to Aboody and Kasznik 2000 , Yermack documents statistically

40、significant increases in award values due to abnormal returns after award date, suggesting that economic gains accrue to managers who can influence the timing of their awards.Note, however, that in all three of the above studies, the authors implicitly assume that reported earnings are exogenous. In

41、 other words, previous research does not explicitly consider the possibility that managers can intervene in the financial reporting process to influence the reported outcome. Of course, the simple fact that options are awarded to managers would not necessarily lead to associations between option awa

42、rds and management of discretionary accruals. However, given that prior research suggests that managers use accounting discretion to accomplish a variety of earnings management objectives, we propose an effect from the use of options as follows. The relative magnitude of option compensation and CEO wealth effects documented by Aboody and Kasznik 2000 , Chauvin and Shenoy 2001 , and Yermack 1997 could give rise to incentives to not only manage disclosures or option award dates, but to influence reported earnings as well.ConclusionsThis study