The Transparency Of Executive Stock Option Disclosures In Australian Annual Reports

We investigate the transparency of executive stock option disclosures of Australian firms for the financial years ending 2000 and 2002. Transparency is measured using an index based on the requirements of the accounting standards dealing specifically with the disclosure of executive stock options. Our study also examines the relationship between firm characteristics and disclosure transparency and the difference in transparency between the years 2000 and 2002. We find that the transparency of executive stock option disclosures is low but improves a little in the year 2002. We also find that the existence of a compensation committee is positively associated with transparency with size being the only significant control variable. Our results are consistent with the contention of Hope (2003a) that managers of firms appear to be treating mandatory requirements as voluntary, possibly due to the low levels of enforcement of the accounting standards.