Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5086971 | Journal of Accounting and Economics | 2009 | 23 Pages |
Abstract
We investigate the backdating of stock option exercises. Before SOX, we find evidence that some exercises were backdated to days with low stock prices. Consistent with a tax-based incentive, these suspect exercises are more likely when the personal tax savings from backdating are higher. However, suspect CEO exercises generate average (median) estimated tax savings of $96,000 ($7,000). These savings appear modest relative to the costs insiders and firms face. We find that the likelihood of a suspect exercise increases in the likelihood of option grant backdating. This suggests that agency problems associated with backdating permeate option compensation in some firms.
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Authors
Dan Dhaliwal, Merle Erickson, Shane Heitzman,