The Predictive Ability of Share-Based Compensation Expense

Alaa Alhaj-Ismail, Sami Adwan

Research output: Contribution to journalArticlepeer-review

Abstract

This paper examines the ability of share-based compensation expense (SBCE) to predict future firm performance relative to other employee compensation expenses. It also examines whether cash settled-based compensation expense has greater predictive ability for future performance than equity settled expense. Using a sample of 443 firms listed in the UK between 2005 and 2018, we find that the predictive ability of SBCE is statistically significantly higher than that of other employee compensation expenses. Furthermore, the results show that the predictive ability of SBCE classified as cash settled is statistically significantly higher than that of equity settled SBCE. Overall, our findings suggest that recognised SBCE, particularly cash settled SBCE (i.e. fair value-adjusted expense), is useful for predicting future firm performance.
Original languageEnglish
Pages (from-to)(In-Press)
JournalAccounting and Business Research
Volume(In-Press)
Publication statusAccepted/In press - 9 Feb 2024

Keywords

  • share-based compensation
  • cash settled-based compensation
  • equity settled-based compensation
  • predictability
  • employee compensation expenses
  • fair value

Fingerprint

Dive into the research topics of 'The Predictive Ability of Share-Based Compensation Expense'. Together they form a unique fingerprint.

Cite this