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

Andrew C. Call, Simi Kedia, Shivaram Rajgopal

Research output: Contribution to journalArticle

10 Citations (Scopus)

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.

Original languageEnglish (US)
Pages (from-to)277-300
Number of pages24
JournalJournal of Accounting and Economics
Volume62
Issue number2-3
DOIs
StatePublished - Nov 1 2016

Fingerprint

Employees
Stock options
Misreporting
Whistle blowing
Violations
Management incentives
Financial reporting
Incentives
Reward

Keywords

  • Misreporting
  • Stock options
  • Whistle-blowing

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Rank and file employees and the discovery of misreporting : The role of stock options. / Call, Andrew C.; Kedia, Simi; Rajgopal, Shivaram.

In: Journal of Accounting and Economics, Vol. 62, No. 2-3, 01.11.2016, p. 277-300.

Research output: Contribution to journalArticle

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