Download or read book Executive Stock Options Firm Performance and Risk written by Allan McCall and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation comprises two essays on the use of stock options as compensation. In the first I examine the implementation of stock option plans in the 1950s as a natural experiment through which to examine the incentive implications of stock options. In the 1950 Revenue Act, Congress created "restricted stock options" that received favorable tax treatment compared to other forms of compensation. Immediately prior to change in tax law, there was almost no use of stock options for compensation. Over subsequent years, the majority of firms in my sample implement stock option plans. I find evidence that executives appear to respond to stock option plans by increasing firm risk and decreasing dividend payments. However, I do not find that firms implementing stock option plans subsequently perform better, and in fact find that in terms of ROA, they perform worse over the two years after putting a stock option plan in place. The second essay examines the economic consequences associated with the board of director choice of whether to adhere to proxy advisory firm policies in the design of stock option repricing programs. Proxy advisors provide research and voting recommendations to institutional investors on issues subject to a shareholder vote. Since many institutional investors follow the recommendations of proxy advisors in their voting, proxy advisor policies are an important consideration for corporate boards in the development of programs that require shareholder approval such as stock option repricing programs. Using a comprehensive sample of stock option repricings announced between 2004 and 2009, we find that repricing firms following the restrictive policies of proxy advisors exhibit statistically lower market reaction to the repricing, lower operating performance, and higher employee turnover. These results are consistent with the conclusion that proxy advisory firm recommendations regarding stock option repricings are not value increasing for shareholders.
Download or read book The Relationship of Broad based Stock Options and Firm Performance in High Technology Companies written by Ryan Alan Hammond and published by . This book was released on 2002 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Executive Stock Options and Firm Performance written by and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Pay to Performance Incentives of Executive Stock Options written by Brian J. Hall and published by . This book was released on 1998 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Detailed data about stock option contracts are used to measure and analyze the pay to performance incentives of executive stock options. Two main issues are addressed. The first is the pay to performance incentives created by the revaluation of stock option holdings. The findings suggest that if CEO stock holdings were replaced by the same ex ante value of stock options, the pay to performance sensitivity of the median CEO would approximately double. Relative to granting at the money options, a value neutral policy of regularly granting options out of the money (Pe=1.5P) would increase pay to performance sensitivity by approximately 27 percent. The second issue is the pay to performance created by yearly stock option grants. Because most stock option plans are multi year plans, it is shown that different option granting plans have significantly different pay to performance incentives since changes in current stock prices affect the value of future option grants in different ways. Four option granting policies are compared and contrasted. Ranked from highest powered to lowest powered, these policies are: 1) LBO-style up-front options, 2) fixed number policies, 3) fixed value policies and 4) an (unofficial) policy of "back-door repricing." Empirical evidence suggests that (even ignoring the revaluation of past option grants) the pay to performance relationship in practice is stronger for 1) stock option grants relative to salary and bonus, and 2) fixed number plans relative to non-fixed number plans.
Download or read book Do Executive Stock Option Grants Have Value Implications for Firm Performance written by Swee Sum Lam and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Consistent with predictions of agency theory, we find direct evidence that executive stock option grants have value implications for firm performance. This inference is drawn from evaluation of various motivations for the use of such grants in executive compensation: value enhancement, risk taking, tax benefit, signaling and cash conservation. We find consistent evidence for the value enhancement motivation to reduce agency costs. As well, they signal for positive price sensitive information. Our results reject the tax benefit and cash conservation motivations. This finding is robust after controlling for the endogenous character of executive stock option grants and other equity-based grants.
Download or read book Pay Without Performance written by Lucian A. Bebchuk and published by Harvard University Press. This book was released on 2004 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Download or read book Employee Stock Option Compensation written by Florian Wolff and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Florian Wolff analyses how executives perceive their stock options and how their personal expectations and risk preferences affect the value they assign to them. He shows that stock options may be worth their money because people behave irrationally.
Download or read book Executive Compensation and Shareholder Value written by Jennifer Carpenter and published by Springer Science & Business Media. This book was released on 2013-04-17 with total page 159 pages. Available in PDF, EPUB and Kindle. Book excerpt: Executive compensation has gained widespread public attention in recent years, with the pay of top U.S. executives reaching unprecedented levels compared either with past levels, with the remuneration of top executives in other countries, or with the wages and salaries of typical employees. The extraordinary levels of executive compensation have been achieved at a time when U.S. public companies have realized substantial gains in stock market value. Many have cited this as evidence that U.S. executive compensation works well, rewarding managers who make difficult decisions that lead to higher shareholder values, while others have argued that the overly generous salaries and benefits bear little relation to company performance. Recent conceptual and empirical research permits for the first time a truly rigorous debate on these and related issues, which is the subject of this volume.
Download or read book Executive Stock Option Valuation written by Yijing Cui and published by . This book was released on 2003 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Non Executive Stock Options and Firm Performance written by Yael V. Hochberg and published by . This book was released on 2016 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether options granted to rank and file employees have effects on the performance of the firm, by exploring the link between broad-based option grants, option portfolio implied incentives and firm operating performance. We employ an instrumental variables approach that combines information about the labor market characteristics in which firms compete with information on firm option programs from the Investor Responsibility Research Center to identify causal effects. Firms that broadly grant options to non-executive employees exhibit higher operating performance than firms that do not grant options broadly. We find a similar positive relationship between the implied incentives of the portfolio of outstanding non-executive options and subsequent firm operating performance. Consistent with economic theory, we find that the incentive-performance effect is larger in smaller firms, and in firms with higher growth opportunities and higher growth options per employee. Finally, we find that the performance effect is concentrated solely in firms that grant options broadly to non-executive employees, supporting the argument that options may induce monitoring among co-workers.
Download or read book The Handbook of the Economics of Corporate Governance written by Benjamin Hermalin and published by Elsevier. This book was released on 2017-09-18 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of the Economics of Corporate Governance, Volume One, covers all issues important to economists. It is organized around fundamental principles, whereas multidisciplinary books on corporate governance often concentrate on specific topics. Specific topics include Relevant Theory and Methods, Organizational Economic Models as They Pertain to Governance, Managerial Career Concerns, Assessment & Monitoring, and Signal Jamming, The Institutions and Practice of Governance, The Law and Economics of Governance, Takeovers, Buyouts, and the Market for Control, Executive Compensation, Dominant Shareholders, and more. Providing excellent overviews and summaries of extant research, this book presents advanced students in graduate programs with details and perspectives that other books overlook. Concentrates on underlying principles that change little, even as the empirical literature moves on Helps readers see corporate governance systems as interrelated or even intertwined external (country-level) and internal (firm-level) forces Reviews the methodological tools of the field (theory and empirical), the most relevant models, and the field’s substantive findings, all of which help point the way forward
Download or read book Effect of Executive Compensation on Firm Performance written by Mohammad Yameenul Abedin and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Agency Costs and Management Contracting written by Swee Sum Lam and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This is an exploratory study on the characteristics and performance of firms that choose to grant executive stock options as a strategic compensation practice. According to the push theory of employee ownership, stock options are granted to push employees to create superior financial performance. We find that firms that grant executive stock options offer persistent abnormal firm performance. Firms that grant stock options in lieu of cash compensation do not perform differently in the long run from those that grant stock options as incentives. This finding is consistent with the proposition that the motivation for the use of executive stock options is endogenously determined for any firm given its investment opportunities and technology, risk characteristics and growth options.
Download or read book Stock Options and the New Rules of Corporate Accountability written by Donald P. Delves and published by McGraw Hill Professional. This book was released on 2003-09-22 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: "As a former CEO and independent director of several corporations, I find Don Delves' discussion of executive compensation -- including detailed and insightful reviews of the issues involving stock options -- to be exceedingly instructive. This is a book that members of compensation committees, indeed all corporate board members should read." -B. Kenneth West, Former CEO, Harris Trust and Savings Bank and member of several corporate boards. Guidelines for curbing today's stock option abuses, and making "payment for performance" the new imperative Stock options account for up to 90 percent of the average CEO's compensation--despite a falling stock market and often plunging corporate earnings. Stock Options and the New Rules of Corporate Accountability examines this hot-button issue, proposing new methodologies and techniques for better aligning stock options, executive compensation, performance rewards, and accounting, and making sense of what has become today's most controversial form of compensation. Executive compensation authority Don Delves explains how high-profile corporations like GE and Coca-Cola have opted to expense stock options and have adjusted their policies to prevent options from becoming disincentive tools, and he shows others how to follow suit. In addition, Delves gives decision makers the knowledge they need to: Increase accountability by treating stock options as expenses Balance options with other incentives Create healthier contracts between employers and employees
Download or read book Executive Compensation and Firm Performance written by Bonnie R. Rabin and published by . This book was released on 1986 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book CEO Option Pay Risk Taking and Firm Performance written by Hussam A. Al-Shammari and published by ProQuest. This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The ever-increasing levels of executive compensation in North America have attracted the growing attention of researchers, policy makers, and the general public. This dissertation reviews the literature on executive compensation and proposes two theoretical models that seek to explain the relationship between CEO option pay, firm risk and performance. Prior empirical research has failed to produce consistent relationships between executive compensation and firm performance. This dissertation opens the "black box" between executive compensation and firm performance and empirically tests the intervening effect of risk-taking behavior on this relationship. It also examines the moderating effects of firm governance systems, strategy and the environment on the relationship between CEO option pay and risk taking. The population for this study is U.S. publicly-traded manufacturing companies. A sample of 204 companies were drawn from the Fortune 1000 for testing the hypothesized relationships. Data were retrieved from various archival sources including Compustat, ExecuComp, Mergent Online, Census for Manufacturing, Thompson Financial, and Value line databases. The dissertation uses both mediated hierarchical regression analyses and moderated hierarchical regression analyses to test the hypothesized relationships suggested in the first and second models, respectively. Results reveal a strong, positive relationship between CEO option pay and a firm's strategic risk, stock returns risk, and income stream risk. Results also showed that firm strategic risk, measured by R & D expenditure, mediates the CEO option pay-firm performance relationship, either fully or partially, depending on which type of performance is being examined. Further, a moderating effect is unveiled for CEO duality, insider ownership, and firm strategy. However, empirical analyses fail to provide adequate evidence to support the expected moderating effect of board independence, institutional and blockholder ownership, and environment.
Download or read book Executive Stock Options and Risk taking written by Wenli Huang and published by . This book was released on 2005 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt:
