Does accounting regulation enhance corporate governance? Evidence from the disclosure of share-based remuneration |
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Authors: | Andrea Melis Silvia Carta |
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Institution: | (1) University of Cagliari, Viale S. Ignazio 17, 09126 Cagliari, Italy |
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Abstract: | Accounting for stock options and share-based remuneration is a controversial issue. The purpose of this study is to explore
the impact of the mandatory adoption of IFRS 2 on accounting for share-based remuneration by Italian listed companies. The
requirements under this standard could have relevant implications for corporate governance as IFRS 2 is expected to reduce
the information asymmetry that may exist between corporate insiders and outsiders regarding such remuneration. Empirical evidence
confirms that overall disclosure in annual reports concerning the costs of remuneration plans has increased following the
adoption of IFRS 2, although some cases of lack of disclosure have also been found. We find that this change in accounting
regulation has contributed towards revealing the ‘true’ cost of share-based remuneration to minority shareholders and other
investors, together with some evidence of creative accounting surrounding the substance over form principle. |
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