Download or read book The Effect of Stock Option Repricing on Employee Turnover written by Mary Ellen Carter and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether repricing underwater stock options reduces both executive and overall employee turnover using a sample of firms that reprice stock options in 1998 and a sample of firms with underwater stock options that choose not to reprice. We find little evidence that repricing affects executive turnover. However, using forfeited stock options to proxy for overall employee turnover, we find that employee turnover in 1999 is negatively related to the 1998 repricing, suggesting that repricing helps to prevent turnover due to underwater options. We find no evidence that the relation between turnover and repricing differs between high technology and nonhigh technology firms.
Download or read book The Effect of Employee and CEO Participation on the Success of Six and One Stock Option Exchanges written by Alex Fayman and published by . This book was released on 2008 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Firms can reprice employee stock options to realign performance and retention incentives when stock price declines cause options to have insignificant expected values. Six-and-one option exchanges allow firms to avoid recognizing compensation expenses when repricing options, but appear unable to improve firm performance and employee retention. Employee turnover is higher during and after exchanges when employee participation in exchanges is low. Stock returns are negative prior to exchanges, especially when CEOs do not participate, yet no significant improvement is observed after. Finally, accounting performance is lower both during and after option exchanges when CEOs do not participate.
Download or read book Structure of Option Repricings written by Fabrizio Ferri and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I present a novel dataset of over 4,000 firm-level repricings of executives and employees' stock options over the period 1987-2002. For a sub-sample of 587 repricings characterized by a homogeneous institutional environment, I investigate determinants and consequences of the structure of the repricing offer, defined in terms of: i) eligibility criteria (i.e. who is eligible to participate?), ii) economic terms (e.g. new exercise price, number of new options granted in replacement of each underwater option), and iii) exerciseability conditions (e.g. restarted vesting schedule, other retention-enhancing features).Overall, I find significant evidence of managerial self-serving behavior in certain aspects of the design of the repricing offer. In particular: i) more visible firms, with stronger corporate governance, are more likely to exclude executives from the repricing offer; ii) retention-enhancing features (which reduce the value of the options) are significantly less likely when executives' options are repriced than in employee-only repricings; iii) repricings are timed just before significant price run-ups when the CEO participates in the repricing, but not in employee-only repricings; iv) higher institutional ownership is associated with economic terms less favorable to executives and stricter exerciseability conditions. The choice of economic terms and exerciseability conditions seems to mostly depend on economic determinants. In particular, firms are more likely to offer a partial repricing when there is a deeper underwater problem, while retention-enhancing features are more frequent when there is a higher perceived retention risk and better outside employment opportunities. Finally, I find weak evidence of a decrease in employee turnover after the repricing, but the extent of such decrease does not seem to depend on the structure of the repricing offer.Beside contributing to the literature on option repricings, these results may be of interest to investors called to vote upon repricing proposals by recent NYSE and NASDAQ rules requiring mandatory shareholder approval for all repricings - unless explicitly authorized by the stock option plan.
Download or read book Costs and Incentive Effects of Stock Option Repricing written by Ulrike Neubauer and published by Peter Lang Publishing. This book was released on 2004 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: Does repricing of executive stock options, i.e. the practice of lowering the exercise price when options are out-of-the-money unfairly reward managers for poor performance and thereby undermine incentives set by the compensation contract? In a study that compares the pay package containing repriced option with an otherwise adjusted package it is shown that repricing is not more expensive to shareholders than otherwise adjusting non-option compensation components. However, the package containing repriced options provides significantly stronger incentives. Furthermore, a policy that constrains the board of directors from repricing does not have significant effects on shareholders' returns."
Download or read book The Stock Price Reactions to the Repricing of Employee Stock Options written by Barbara M. Grein and published by . This book was released on 2012 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study whether employee stock option repricings are in the best interests of shareholders by investigating the excess stock returns associated with timely, non-contaminated announcements of repricings by Canadian firms. We develop four theories of why firms reprice employee stock options, and test the competing predictions the theories make regarding the mean announcement-date excess stock return, and the cross-sectional relations between announcement-date excess returns and candidate economic factors. For 57 non-contaminated repricing announcements over the period November 1994-July 2001, we document a significantly positive three-day mean announcement-date excess return of 6.6%. Combined with the results of cross-sectional regressions, we conclude that the market incorporates the probability of repricing into its pre-repricing assessment of firm value, and responds favorably to announcements of repricings for reasons of incentive realignment and employee retention. The market does not react as though managers use repricings to extract rents from shareholders, nor does the act of repricing appear to systematically reveal favorable private information about the firm.
Download or read book Too Much Is Not Enough written by Robert W. Kolb and published by Oxford University Press. This book was released on 2012-08-02 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: The scholarly literature on executive compensation is vast. As such, this literature provides an unparalleled resource for studying the interaction between the setting of incentives (or the attempted setting of incentives) and the behavior that is actually adduced. From this literature, there are several reasons for believing that one can set incentives in executive compensation with a high rate of success in guiding CEO behavior, and one might expect CEO compensation to be a textbook example of the successful use of incentives. Also, as executive compensation has been studied intensively in the academic literature, we might also expect the success of incentive compensation to be well-documented. Historically, however, this has been very far from the case. In Too Much Is Not Enough, Robert W. Kolb studies the performance of incentives in executive compensation across many dimensions of CEO performance. The book begins with an overview of incentives and unintended consequences. Then it focuses on the theory of incentives as applied to compensation generally, and as applied to executive compensation particularly. Subsequent chapters explore different facets of executive compensation and assess the evidence on how well incentive compensation performs in each arena. The book concludes with a final chapter that provides an overall assessment of the value of incentives in guiding executive behavior. In it, Kolb argues that incentive compensation for executives is so problematic and so prone to error that the social value of giving huge incentive compensation packages is likely to be negative on balance. In focusing on incentives, the book provides a much sought-after resource, for while there are a number of books on executive compensation, none focuses specifically on incentives. Given the recent fervor over executive compensation, this unique but logical perspective will garner much interest. And while the literature being considered and evaluated is technical, the book is written in a non-mathematical way accessible to any college-educated reader.
Download or read book Six month one day Employee Stock Option Repricing written by Liu Zheng and published by . This book was released on 2003 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Option to Quit written by Serdar Aldatmaz and published by . This book was released on 2014 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that in the years following a large broad-based employee stock option (BBSO) grant, employee turnover falls at the granting firm. We find evidence consistent with a causal relation by exploiting unexpected changes in the value of unvested options. A large fraction of the reduction in turnover appears to be temporary with turnover increasing in the 3rd year following the year of the adoption of the BBSO plan. We also find that the effect of BBSO plans is larger at market leaders, identified as firms with high industry-adjusted market-to-book ratios, market share or industry-adjusted profit margins, as measured at the time of the grant.
Download or read book Executives Out of the money written by Benjamin B. Dunford and published by . This book was released on 2004 with total page 282 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Academy of Management Annals written by James P. Walsh and published by Taylor & Francis. This book was released on 2007 with total page 750 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Academy of Management is proud to announce the inaugural volume of The Academy of Management Annals. This exciting new series follows one guiding principle: The advancement of knowledge is possible only by conducting a thorough examination of what is known and unknown in a given field. Such assessments can be accomplished through comprehensive, critical reviews of the literature--crafted by informed scholars who determine when a line of inquiry has gone astray, and how to steer the research back onto the proper path. The Academy of Management Annals provide just such essential reviews. Written by leading management scholars, the reviews are invaluable for ensuring the timeliness of advanced courses, for designing new investigative approaches, and for identifying faulty methodological or conceptual assumptions. The Annals strive each year to synthesize a vast array of primary research, recognizing past principal contributions while illuminating potential future avenues of inquiry. Volume 1 of the Annals explores a wide spectrum of research: corporate control; nonstandard employment; critical management; physical work environments; public administration team learning; emotions in organizations; leadership and health care; creativity at work; business and the environment; and bias in performance appraisals. Ultimately, academic scholars in management and allied fields (e.g., sociology of organizations and organizational psychology) will see The Academy of Management Annals as a valuable resource to turn to for comprehensive, up-to-date information--published in a single volume every year by the preeminent association for management research.
Download or read book The Effect of Accounting on Economic Behavior written by Mary Ellen Carter and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine stock option repricing activity that coincided with the December 4, 1998 FASB announcement regarding accounting for repriced employee stock options. The accounting treatment requires recognition of compensation expense in future periods if there is an increase in stock price after repricing. We find that repricing firms experience significant negative cumulative abnormal returns surrounding the December 4, 1998 FASB announcement date. We document a significant increase in repricing activity in the 12-day window between the announcement date and the proposed effective date, during which firms could reprice without taking a charge to earnings, and a significant decrease in repricing activity after the proposed effective date. This evidence suggests that the FASB announcement of the new accounting altered firms' economic decisions. In examining firms' decisions to reprice in the 12-day window to avoid the accounting charge, we find that positive earnings firms, growth firms, firms experiencing increasing earnings patterns, and firms with the greater potential effect on earnings are more likely than other firms to reprice in this window. In addition, we find that firms' prior repricing behavior affects their decision to reprice in this window, suggesting that there are implicit costs associated with repricing. The evidence is consistent with firms' trading off valuation implications of repricing to avoid an earnings charge against these implicit costs associated with repricing in the window.
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 The Complete Guide to Employee Stock Options written by Frederick D. Lipman and published by Prima Lifestyles. This book was released on 2001 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerous private and public companies offer stock option plans every year to motivate, retain, and reward employees. But implementing the right stock option plan can be a complex and daunting undertaking, without the proper guidance.The Complete Guide to Employee Stock Optionsunravels the mystery of creating a meaningful equity compensation plan for employees that is favorable for the business. Author and attorney Frederick D. Lipman describes in complete detail the legal, operational, and motivational aspects of developing a stock option program, whether it's for the new start-up looking to attract top talent or the venerable company looking for ways to reward its best performing employees. Readers will discover how to: * Understand the pros and cons of different option plans* Implement the right plan to meet the company's future plans* Motivate key employees with equity compensation* Minimize the risk of losing equity in a volatile market* And much moreThis book also includes useful information for employees who want to understand what their stock options mean and how to maximize their profitability. Complete wi
Download or read book Executive Stock Option Repricing Internal Governance Mechanisms and Management Turnover written by N.K. Chidambaran and published by . This book was released on 2010 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze characteristics of firms that reprice their executive stock options (ESOs). We document that repricings are economically significant compensation events but there is little else unusual about compensation levels or changes in repricers. Cross-sectionally, repricers are rapidly growing firms that experience a deep, sudden shock to growth and profitability. Repricers are likely to be smaller, younger, more concentrated in technology, trade or service industry sectors, and have smaller boards of directors relative to firms that did not reprice ESOs despite similar return shocks. Repricers have abnormally high CEO turnover rates, and do not show low institutional ownership or more diffuse ownership of their equity. Over 40% of repricers do not include the CEO in the list of executives repriced. Collectively, our evidence provides little support for the view that repricing primarily reflects managerial entrenchment or ineffective governance in firms.
Download or read book Employee Stock Option Valuation with Repricing Features written by Kwai Sun Leung and published by . This book was released on 2007 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: Repricing of an employee stock option refers to the practice of lowering the strike price and /or extending the maturity date of a previously granted employee stock option. Normally, firms reprice after a period of significant stock price decline that renders the employee stock options deeply out-of-the-money. By modeling various repricing mechanisms based on some form of Brownian functional of the stock price process, we investigate the impact of the embedded repricing flexibility on the market value of the employee stock options. We manage to derive analytic representation of the price functions of the repriceable options. We also construct the lattice tree type option valuation algorithms by applying the forward shooting grid technique to incorporate the path dependent feature of the Brownian functional in the repriceable option models. Our calculations show that the repricing flexibility may have varying degrees of impact on the option values and their comparative statics. The option delta (option vega) values of the repriceable options are seen to be lower (higher) than those of the vanilla options.
Download or read book Compensation and Organizational Performance written by Luis R. Gomez-Mejia and published by Routledge. This book was released on 2014-12-18 with total page 405 pages. Available in PDF, EPUB and Kindle. Book excerpt: This up-to-date, research-oriented textbook focuses on the relationship between compensation systems and firm overall performance. In contrast to more traditional compensation texts, it provides a strategic perspective to compensation administration rather than a functional viewpoint. The text emphasizes the role of managerial pay, its importance, determinants, and impact on organizations. It analyzes recent topics in executive compensation, such as pay in high technology firms, managerial risk taking, rewards in family companies, and the link between compensation and social responsibility and ethical issues, among others. The authors provide a thorough and comprehensive review of the vast literatures relevant to compensation and revisit debates grounded in different theoretical perspectives. They provide insights from disciplines as diverse as management, economics, sociology, and psychology, and amplify previous discussions with the latest empirical findings on compensation, its dynamics, and its contribution to firm overall performance.
Download or read book JOURNAL OF Accounting Economics written by and published by . This book was released on 2004 with total page 832 pages. Available in PDF, EPUB and Kindle. Book excerpt:
