Employee stock option plans and stock market reaction: evidence from Finland
AbstractThis paper examines whether the adoption of stock option plans results in changes in shareholders' wealth, and whether the stock market reactions to ESOP announcements could be explained by the target group of ESOP and the dilution effect. Short-horizon test methods are applied for this purpose. The sample consists of ESOP announcements of Finnish publicly quoted companies on the Helsinki Stock Exchange during the time period 1988-1998. The event study results show a slightly positive market reaction to announcements of ESOPs targeted to management and a negative market reaction in the case of ESOPs targeted to all employees. The results of regression analysis show that the ESOPs with limited dilution convey positive information to the stock market and the dilution effect has a negative impact on stock returns, especially in the case of ESOPs targeted to all employees.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal The European Journal of Finance.
Volume (Year): 10 (2004)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.tandfonline.com/REJF20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maynes, Elizabeth & Rumsey, John, 1993. "Conducting event studies with thinly traded stocks," Journal of Banking & Finance, Elsevier, vol. 17(1), pages 145-157, February.
- Huddart, Steven & Lang, Mark, 1996. "Employee stock option exercises an empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 21(1), pages 5-43, February.
- Jensen, Michael C & Murphy, Kevin J, 1990.
"Performance Pay and Top-Management Incentives,"
Journal of Political Economy,
University of Chicago Press, vol. 98(2), pages 225-64, April.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Corrado, Charles J. & Zivney, Terry L., 1992. "The Specification and Power of the Sign Test in Event Study Hypothesis Tests Using Daily Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(03), pages 465-478, September.
- Brickley, James A. & Bhagat, Sanjai & Lease, Ronald C., 1985. "The impact of long-range managerial compensation plans on shareholder wealth," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 115-129, April.
- DeFusco, Richard A & Johnson, Robert R & Zorn, Thomas S, 1990. " The Effect of Executive Stock Option Plans on Stockholders and Bondholders," Journal of Finance, American Finance Association, vol. 45(2), pages 617-27, June.
- Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Jones, Derek C. & Kalmi, Panu & Mäkinen, Mikko, 2006.
"The Productivity Effects of Stock Option Schemes: Evidence from Finnish Panel Data,"
1026, The Research Institute of the Finnish Economy.
- Derek Jones & Panu Kalmi & Mikko Mäkinen, 2010. "The productivity effects of stock option schemes: evidence from Finnish panel data," Journal of Productivity Analysis, Springer, vol. 33(1), pages 67-80, February.
- Chia-Ying Chan & Ling-Chu Lee & Ming-Chun Wang, 2010. "Employee stock options pricing and the implication of restricted exercise price: evidence from Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 34(2), pages 247-271, February.
- Jordan, Dan J. & Rice, Douglas & Sanchez, Jacques & Wort, Donald H., 2011. "Explaining bank market-to-book ratios: Evidence from 2006 to 2009," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2047-2055, August.
- Jones, Derek C. & Kalmi, Panu & Mäkinen, Mikko, 2004. "The Determinants of Stock Option Compensation: Evidence from Finland," Discussion Papers 957, The Research Institute of the Finnish Economy.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.