The impact of executive pay on the disclosure of alternative earnings per share figures

Colette Grey, Konstantinos Stathopoulos and Martin Walker

International Review of Financial Analysis, 2013, vol. 29, issue C, 227-236

Abstract: This paper investigates the motives for disclosing an alternative earnings per share (EPS) figure. In particular, we extend prior findings for the UK (Choi, Lin, Walker & Young, 2007) by highlighting the role of managerial contracting in the alternative EPS disclosure choice. We examine a specific contractual setting where management is especially sensitive to reported earnings numbers, i.e., when EPS performance targets exist in the managerial remuneration package. Our analysis suggests that the choice to disclose an alternative EPS figure is positively related to firms where the vesting of executive share options (ESOs) is contingent on the achievement of growth in EPS. Our results remain significant after testing for selection bias, direction of causality and after matching firms on variables prior literature identifies as influential in the choice of an EPS target as a performance criterion in executive remuneration.

Keywords: Accounting choice; Earnings per share; Transitory items; Executive remuneration; Share options (search for similar items in EconPapers)
JEL-codes: G34 M41 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:29:y:2013:i:c:p:227-236

DOI: 10.1016/j.irfa.2012.09.005

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