'The True and Fair View' of Executive Stock Option Valuation

'The True and Fair View' of Executive Stock Option Valuation

We compare the market values of executive stock option (ESO) trades with their Black & Scholes (1973) model values calculated following the major accounting standards, SFAS No. 123r and IFRS2. Our results show major underpricing compared to the traditional B&S method values. This should be c...

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Veröffentlicht in:The European accounting review 2006-09, Vol.15 (3), p.351-366
Hauptverfasser: Ikäheimo, Seppo, Kuosa, Nuutti, Puttonen, Vesa
Format: Artikel
Sprache:eng
Schlagworte:
Accounting standards
Accounting theory
Business organization
Comparative analysis
FASB statements
Financial accounting
Financial accounting standards
Financial models
IFRS 2
International accounting standards
International Financial Reporting Standards
Market value
Options on stocks
Senior management
SFAS 123R
Stock options
Stock prices
Studies
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Beschreibung
Zusammenfassung:We compare the market values of executive stock option (ESO) trades with their Black & Scholes (1973) model values calculated following the major accounting standards, SFAS No. 123r and IFRS2. Our results show major underpricing compared to the traditional B&S method values. This should be considered while applying SFAS No. 123r and IFRS2 for estimating fair values. Especially time to expiration has a major influence on the undervaluation suggesting that the possibility of a change in corporate structure lowers the cost of ESOs to shareholders.
ISSN:0963-8180
1468-4497
DOI:10.1080/09638180600916267