@article{60544761496b48c4ac699f06e8348b1f,
title = "Rank and file employees and the discovery of misreporting: The role of stock options",
abstract = "We find that firms grant more rank and file stock options when involved in financial reporting violations, consistent with managements{\textquoteright} 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",
author = "Call, {Andrew C.} and Simi Kedia and Shivaram Rajgopal",
note = "Funding Information: This paper was the 2011–2012 winner of the Glen McLaughlin Prize for Research in Accounting and Ethics from the University of Oklahoma. We thank S. P. Kothari (the editor), Richard Sloan (the discussant), Tom Chang, Carola Frydman, Frank Hodge, Rick Mergenthaler, Mark Peecher, and workshop participants at the 2011 UBCOW (Universities of British Columbia, Oregon, and Washington) conference, the 2012 Conference on Financial Economics and Accounting (CFEA), the 2013 American Finance Association annual meeting, Arizona State University, Lehigh University, Nanyang Technological University, National University of Singapore, Texas A&M University, the University of Notre Dame, the University of Oklahoma, and the CFA-FAJ-Schulich Conference at York University, sponsored by CFA Institute, Financial Analysts Journal, and Schulich School of Business. We thank Jonathan Karpoff, Scott Lee, and Gerald Martin for graciously sharing their SEC enforcement data. We are grateful for financial support from the Whitcomb Center at Rutgers Business School and Goizueta Business School. All errors remain ours. Publisher Copyright: {\textcopyright} 2016 Elsevier B.V.",
year = "2016",
month = nov,
day = "1",
doi = "10.1016/j.jacceco.2016.06.003",
language = "English (US)",
volume = "62",
pages = "277--300",
journal = "Journal of Accounting and Economics",
issn = "0165-4101",
publisher = "Elsevier",
number = "2-3",
}