Contagion of accounting methods: evidence from stock option expensing

David A. Reppenhagen ()
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David A. Reppenhagen: University of Florida

Review of Accounting Studies, 2010, vol. 15, issue 3, No 10, 629-657

Abstract: Abstract I examine how a firm’s accounting methods can be influenced by the choices of other firms, which I label contagion. I model accounting method choice as a combination of intrinsic propensities to adopt a method and contagion effects. I predict contagion of accounting methods occurs for two reasons: (1) adoption decisions of other firms are informative for the adoption decision, and (2) prior adoptions change the net benefits of the decision. I test these predictions in the stock option expensing setting where firms had the choice to use the intrinsic or fair value method. Using a firm-level diffusion model, I document evidence consistent with my predictions.

Keywords: Accounting choice; Contagion; Diffusion; Stock options (search for similar items in EconPapers)
JEL-codes: M40 M41 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1007/s11142-010-9128-1

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