The Markets Reaction To The FASB Stock-Based Compensation Project

Abstract

Stock-based compensation plans are often used to companies as a method of providing incentive compensation to top executives. In this study we investigate the market response to the announcement and subsequent withdrawal of the FASB stock-based compensation project. Our findings suggest that investors expected the reduction in uncertainty resulting from expensing stock option costs to enhance firm value and were disappointed when the FASB withdrew the project.