Accounting Choices and Director Interlocks: A Social Network Approach to the Voluntary Expensing of Stock Option Grants

Eugene Kang and Brian R. Tan

Journal of Business Finance & Accounting, 2008, vol. 35, issue 9‐10, 1079-1102

Abstract: Abstract: We adopt a social network perspective of accounting choices and argue that voluntary expensing of stock option grants by firms may be driven by social influence and learning within a network of director interlocks. We find that firms are more likely to expense stock option grants voluntarily when they have inside director interlocks with (1) other firms that do likewise, and (2) institutional investors of firms accused of financial reporting fraud. This study contributes to extant research by highlighting that a social network approach complements a cost‐and‐benefit approach (or an economic perspective) when examining the accounting practices of firms.

Date: 2008
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https://doi.org/10.1111/j.1468-5957.2008.02114.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:35:y:2008:i:9-10:p:1079-1102

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