Characteristics Of Firms Responding To Underwater Employee Stock Options
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| Author | : Valentina L. Zamora |
| Publisher | : |
| Total Pages | : |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
I examine the characteristics of firms choosing to respond to underwater employee stock options using one of three stock option-based responses. A traditional repricing offers a new and lower exercise price to restore the incentive alignment and retention power lost in underwater options but is subject to potential expense recognition. A 6amp;1 exchange likewise restores what was lost in underwater options but avoids potential expense recognition by delaying the issuance of replacement options until six months and one day later. A makeup grant potentially increases the total option value lost and avoids potential expense recognition, but is more dilutive since old underwater options are not cancelled. Results indicate that makeup grant firms have relatively deeper underwater options with shorter expected remaining lives. Makeup grant firms also issue these options to more non-executives compared to traditional repricing firms. I also find that while both makeup grant and 6amp;1 exchange firms have less insider ownership and historically report positive income than traditional repricings, 6amp;1 exchange firms have greater overhang than makeup grant firms. Taken together, a possible explanation for these results is that firms that have more incentive alignment and/or retention power lost in underwater options prefer makeup grants that potentially increase total option value for its non-executive optionholders. However, when dilution from options is also a concern, it appears these firms may opt for a 6amp;1 exchange. In addition, it is possible that the choice of response is associated more with the desire to avoid recognizing option expense, rather than with potential rent extraction opportunities, as critics claim.
| Author | : Valentina L. Zamora |
| Publisher | : |
| Total Pages | : 170 |
| Release | : 2003 |
| Genre | : Employee stock options |
| ISBN | : |
| Author | : Valentina L. Zamora |
| Publisher | : |
| Total Pages | : 47 |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
While firms claim that 6amp;1 exchanges and makeup grants help realign incentives and retain employees, critics argue that these responses provide opportunities for managerial rent extraction. Moreover, scholars challenge that these alternative responses are chosen to avoid the expense associated with traditional repricings or to substitute for cash. I test these competing explanations by comparing 6amp;1 exchange firms with traditional repricing firms, and makeup grant firms with traditional repricing firms. Results indicate that 6amp;1 exchange firms have a greater need to realign employee incentive and makeup grant firms have a greater need to retain employees. I also find that firms having higher financial reporting concerns are more likely to choose 6amp;1 exchanges or makeup grants over traditional repricings. Also, firms with stronger governance structures choose 6amp;1 exchanges and firms with less dividend constraints choose makeup grants. Overall, these findings suggest that economic reasons drive alternative responses to underwater stock options.
| Author | : Robert W. Kolb |
| Publisher | : Oxford University Press |
| Total Pages | : 231 |
| Release | : 2012-08-23 |
| Genre | : Business & Economics |
| ISBN | : 0199829586 |
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.
| Author | : James C. Sesil |
| Publisher | : |
| Total Pages | : |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
While stock options have traditionally been reserved to top management employees, in recent years there has been strong growth of plans making stock options available to a broader group of employees. This paper analyses data on 490 companies with broad-based stock option plans, matched to data from Compustat in order to compare their characteristics and performance to that of other public companies. Major findings are that 1) companies with broad-based plans have higher levels of productivity, Tobin's Q, and employment and sales growth than otherwise-similar firms, 2) average compensation levels are higher among such companies both before and after the introduction of broad-based plans, indicating that stock options appear to come on top of other compensation, and 3) increases in average productivity appear to counterbalance the dilution effect so that average total shareholder returns are unaffected by the introduction of broad-based stock option plans.
| Author | : Wojciech Grabowski |
| Publisher | : Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften |
| Total Pages | : 0 |
| Release | : 2012 |
| Genre | : Corporations |
| ISBN | : 9783631630358 |
The book investigates empirically mechanisms behind the recent widespread use of employee stock options and share repurchases in corporate financial management. Exploring through econometric models a sample of large U.S. technology corporations in the period between 1997 and 2005, it documents complex links between stock option plans, payout policy and other key financial characteristics of these firms. The models highlight the interplay between the interests of long-term shareholders, optionholders and speculative investors and provide estimates of joint effects of option dynamics and repurchases on stock returns, undervaluation and option plans on payout policy as well as risk taking and revenue growth on payoffs to shareholders and optionholders.
| Author | : |
| Publisher | : |
| Total Pages | : 688 |
| Release | : 2008 |
| Genre | : Dissertations, Academic |
| ISBN | : |
| Author | : James Charles Collins |
| Publisher | : Random House |
| Total Pages | : 324 |
| Release | : 2001 |
| Genre | : Business & Economics |
| ISBN | : 0712676090 |
Can a good company become a great one and, if so, how?After a five-year research project, Collins concludes that good to great can and does happen. In this book, he uncovers the underlying variables that enable any type of organization to
| Author | : Scott S. Rodrick |
| Publisher | : |
| Total Pages | : 230 |
| Release | : 2000 |
| Genre | : Business & Economics |
| ISBN | : |
| Author | : Benjamin Hermalin |
| Publisher | : Elsevier |
| Total Pages | : 762 |
| Release | : 2017-09-18 |
| Genre | : Business & Economics |
| ISBN | : 0444635408 |
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
