Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1006742 | Research in Accounting Regulation | 2009 | 10 Pages |
This study investigates how the financial expertise of independent directors is associated with voluntary accounting policy decisions. As representatives of a company’s shareholders, financially-expert independent directors are more likely to cause management to pursue higher quality accounting policy decisions. The policy decision investigated involves the expense/non-expense policy choice for employee stock options as previously permitted under SFAS No. 123. Using a sample of 174 option-expensing firms and a matched control sample of 174 non-expensing firms, the results indicate a significant, positive association between the decision to expense employee stock options and the financial expertise of a company’s independent directors. Further, a significant, negative association was found between the option-expensing decision and whether the chief executive officer was the largest internal blockholder.