Title: The effects of R&D expenditure and earnings management on stock options: evidence from market competition

Authors: Yi-Mien Lin; Tzu-Wen Lee

Addresses: Department of Accounting, National Chung Hsing University, Taichung 402, Taiwan ' Department of Accounting, China University of Technology, Taipei 116, Taiwan

Abstract: This paper examines the effects of R&D expenditures and earnings management on executive stock options and the effects of the competitiveness of a firm in the industry on R&D and executive stock options under controlling for managerial incentive and corporate governance. The findings are that as R&D of a firm increases, managers are more likely to manipulate earnings to enhance the firm value, thus creating a higher value for stock options. Being more competitive in the industry motivates the firm to broaden business territory, thus it will invest more in R&D to obtain a larger market share. The stronger the competitiveness of a firm and the better the performance are, the more stock options that will be granted to managers.

Keywords: product market competition; R&D expenditure; stock options compensation; corporate governance; managerial incentive; earnings management.

DOI: 10.1504/IJAAPE.2021.117579

International Journal of Accounting, Auditing and Performance Evaluation, 2021 Vol.17 No.1/2, pp.148 - 172

Accepted: 02 Apr 2020
Published online: 14 Sep 2021 *

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