An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Eli Bartov
New York University

Carla Hayn
University of California - Los Angeles

Abstract: We investigate whether investors changed their view of option expensing between the enactment of SFAS No. 123 in 1995 and SFAS No. 123(R). We hypothesize that there was a shift in investor sentiment in favor of option expensing following Enron and other accounting scandals that surfaced in late 2001 and 2002. Our primary findings suggest that while option expensing still carries negative connotations as documented by prior studies investigating SFAS No. 123, these are outweighed by investors’ desire for more transparent financial statements.

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