Option pricing and corporate report disclosures: managerial incentives to undervalue

摘要: This study examines disclosures of the value executive stock options by Australian listed companies in annual reports for periods ending 2002 and 2003. Drawing on ‘managerial power’ theory, posits that managers have incentives to limit lowest level possible without causing significant stakeholder outrage, The also relation between extent which firms underprice disclosed (ie relative a computed benchmark) factors are known influence option valuation. results show reports, is consistent with US evidence provides similar findings. suggest possibility manipulate Black-Scholes (BS) valuation model opportunistically undervalue issued directors top five executives. Size, leverage, firm age profitability found be explaining underpricing. Further, smaller remuneration proportion market capitalisation, higher undervaluation options. As well as opportunism, this latter finding less familiarity expertise valuing these instruments when represent lower management compensation capitalisation. findings potential implications participants understanding nature performance. It has implementation AASB 2 Share-based Payment requires expensing granted remuneration. Moreover, there may regulatory policy if it can established preferred models pricing report disclosure purposes ‘managed’ opportunistic reasons.