What Incentivises Managers to Engage in Financial Misreporting? An Analysis of Stock Delta, Option Delta, and Vega

Jay Junghun Lee and Bo Xu

Accounting and Finance, 2025, vol. 65, issue 3, 2976-3003

Abstract: Previous studies provide mixed evidence regarding the relation between managers' equity incentives and financial misstatements. We hypothesise that the mixed results stem from measurement error in portfolio delta that reflects the joint sensitivity of a manager's stock and option portfolio to changes in equity prices. Splitting portfolio delta into stock delta and option delta, we find that option delta has a dominating effect over stock delta and vega in explaining financial misstatements and that the impact of option delta is mainly attributable to the effect of CEO's option delta, as opposed to that of CFO's option delta.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/acfi.70027

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:acctfi:v:65:y:2025:i:3:p:2976-3003

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is currently edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().