'The True and Fair View' of Executive Stock Option Valuation
AbstractWe compare the market values of executive stock option (ESO) trades with their Black & Scholes (1973) model values calculated following the major accounting standards, SFAS No. 123r and IFRS2. Our results show major underpricing compared to the traditional B&S method values. This should be considered while applying SFAS No. 123r and IFRS2 for estimating fair values. Especially time to expiration has a major influence on the undervaluation suggesting that the possibility of a change in corporate structure lowers the cost of ESOs to shareholders.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal European Accounting Review.
Volume (Year): 15 (2006)
Issue (Month): 3 ()
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Web page: http://www.tandfonline.com/REAR20
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