Date of Award

Spring 1-1-2012

Document Type


Degree Name

Doctor of Philosophy (PhD)


Accounting & Business Law

First Advisor

Steven K. Rock

Second Advisor

Bjorn Nybo Jorgensen

Third Advisor

Philip Shane

Fourth Advisor

Mattias Nilsson

Fifth Advisor

Katherine Gunny


Extant literature provides mixed evidence about whether managers preempt scheduled stock option grants with negative voluntary disclosures to reduce the strike price of the option (also known as “spring-loading” or “bullet-dodging”). This study contributes to the literature by illustrating that the use and type of preemptive news disclosures (otherwise known as “expectation management”) depends on the timing of the grant relative to the earnings announcement. Specifically, managers appear to disclose negative news prior to a scheduled option grant that occurs shortly before an earnings announcement but not when the grant occurs shortly after an earnings announcement. I conjecture that managers are more likely to preempt a scheduled grant occurring after an earnings announcement with positive news, but find limited evidence to support this hypothesis. Additionally, I demonstrate that the regulatory environment plays a role in the manager’s decision to engage in expectation management prior to a scheduled equity grant. Managers appear to be more likely to use downward expectation management following the enactment of the Sarbanes-Oxley Act and less likely after 2006 SEC regulation increasing executive compensation disclosure.

Included in

Accounting Commons