Executive stock options, firm performance and risk
Abstract/Contents
- Abstract
- 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.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2013 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | McCall, Allan |
|---|---|
| Associated with | Stanford University, Graduate School of Business. |
| Primary advisor | Larcker, David F |
| Thesis advisor | Larcker, David F |
| Thesis advisor | Beyer, Anne |
| Thesis advisor | Rajan, Madhav V |
| Advisor | Beyer, Anne |
| Advisor | Rajan, Madhav V |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Allan McCall. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2013. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2013 by Allan Lee McCall
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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