Management accounting & control
      Managerial manipulation and the impact of regulatory intervention at stock option grants: the UK evidence
    Kater, K. de | Kuang, Y.F
    MCA, 2009
    Stock options account for an ever greater percentage of total managerial compensation. Managers benefit from the difference between current share price and the options exercise price. To maximize profits, they may therefore try to lower the value of shares at or around the option grant date. This paper reviews empirical evidence on managerial opportunism in the UK with regard to option packages and investigates the impact of regulatory intervention by the UK administration. The findings suggest that regulatory intervention did indeed have a positive effect on one of the illegal methods used, to wit backdating options. They also show however that still stock prices start dropping before the option grant dates, and that on the grant date the market return is significantly negative. This suggests that managers may still exert influence on information flows and financial reporting in order to maximize their own option profits.
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