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Evidence of managerial opportunism in Australia

Author

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  • Andrew Trumble
  • Sean Pinder

Abstract

Purpose - The purpose of this paper is to test for managerial opportunism, specifically the backdating of executive options, in Australia. Design/methodology/approach - The paper analyses the return behaviour associated with a sample of 161 unscheduled options granted by Australian firms. Specifically, the authors test for differences between a subsample of grants that had late‐filed notices (and hence may be subject to backdating) versus those that had notices filed on‐time. Findings - Consistent with backdating, it is found that these abnormal post‐grant returns persist for a sub‐sample of late‐filed grants but not for a sub‐sample of grants with same‐day filing. Furthermore – the authors find even stronger results for option grants made by firms with a history of late‐filing but for which no notice was filed with the Australian Securities Exchange. This paper is the first to demonstrate these effects in a setting subject to the IFRS requirement that the fair value (rather than the intrinsic value) of executive options be expensed. Originality/value - This paper is the first to demonstrate these effects in Australia and further in a setting subject to the IFRS requirement that the fair value (rather than the intrinsic value) of executive options be expensed.

Suggested Citation

  • Andrew Trumble & Sean Pinder, 2012. "Evidence of managerial opportunism in Australia," Accounting Research Journal, Emerald Group Publishing Limited, vol. 25(1), pages 25-40, July.
    • Handle: RePEc:eme:arjpps:v:25:y:2012:i:1:p:25-40
    DOI: 10.1108/10309611211244492
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    Citations

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    Cited by:

    1. Jean Canil & Bruce Rosser, 2015. "Evidence on exercise pricing in CEO option grants in two countries," Annals of Finance, Springer, vol. 11(3), pages 383-410, November.
    2. Richard Kent & James Routledge & Karen McPherson, 2017. "Use of benchmarks in predicting earnings management?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(1), pages 239-260, March.

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