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 language | English |
|---|---|
| Pages (from-to) | (In-Press) |
| Number of pages | 34 |
| Journal | Accounting and Business Research |
| Volume | (In-Press) |
| Early online date | 18 Jun 2024 |
| DOIs | |
| Publication status | E-pub ahead of print - 18 Jun 2024 |
Bibliographical note
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.Keywords
- G32
- J33
- M41
- M52
- cash settled-based compensation
- employee compensation expenses
- equity settled-based compensation
- fair value
- predictability
- share-based compensation
ASJC Scopus subject areas
- Accounting