Contagion of accounting methods: evidence from stock option expensing |
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Authors: | David A Reppenhagen |
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Institution: | (1) Fisher School of Accounting, University of Florida, 210 Gerson Hall, Gainesville, FL 32611, USA |
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Abstract: | I examine how a firm’s accounting methods can be influenced by the choices of other firms, which I label contagion. I model
accounting method choice as a combination of intrinsic propensities to adopt a method and contagion effects. I predict contagion
of accounting methods occurs for two reasons: (1) adoption decisions of other firms are informative for the adoption decision,
and (2) prior adoptions change the net benefits of the decision. I test these predictions in the stock option expensing setting
where firms had the choice to use the intrinsic or fair value method. Using a firm-level diffusion model, I document evidence
consistent with my predictions. |
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Keywords: | |
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