The purpose of this paper is to test for managerial opportunism, specifically the backdating of executive options, in Australia.
The paper analyses the return behaviour associated with a sample of 161 unscheduled options granted by Australian firms. Specifically, the authors test for differences between a subsample of grants that had late‐filed notices (and hence may be subject to backdating) versus those that had notices filed on‐time.
Consistent with backdating, it is found that these abnormal post‐grant returns persist for a sub‐sample of late‐filed grants but not for a sub‐sample of grants with same‐day filing. Furthermore – the authors find even stronger results for option grants made by firms with a history of late‐filing but for which no notice was filed with the Australian Securities Exchange. This paper is the first to demonstrate these effects in a setting subject to the IFRS requirement that the fair value (rather than the intrinsic value) of executive options be expensed.
This paper is the first to demonstrate these effects in Australia and further in a setting subject to the IFRS requirement that the fair value (rather than the intrinsic value) of executive options be expensed.
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