Rank and file employees and the discovery of misreporting: The role of stock options

Andrew C. Call, Simi Kedia and Shivaram Rajgopal

Journal of Accounting and Economics, 2016, vol. 62, issue 2, 277-300

Abstract: We find that firms grant more rank and file stock options when involved in financial reporting violations, consistent with managements’ incentives to discourage employee whistle-blowing. Violating firms grant more rank and file options during periods of misreporting relative to control firms and to their own option grants in non-violation years. Moreover, misreporting firms that grant more rank and file options during violation years are more likely to avoid whistle-blowing allegations. Although the Dodd-Frank Act (2010) offers financial rewards to encourage whistle-blowing, our findings suggest that firms discourage whistle-blowing by giving employees incentives to remain quiet about financial irregularities.

Keywords: Misreporting; Stock options; Whistle-blowing (search for similar items in EconPapers)
JEL-codes: M40 M41 M48 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:62:y:2016:i:2:p:277-300

DOI: 10.1016/j.jacceco.2016.06.003

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