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The Value and Incentives of Option-based Compensation in Danish Listed Companies

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Author Info
Bechmann, Ken L. () (Department of Finance, Copenhagen Business School)
Jørgensen, Peter Løchte () (Department of Management)
Abstract

Over the last decade the Danish corporate environment has experienced a significant increase in the use of option-based compensation (OBC). This and many other facts are documented in the present paper which provides the first insights into the characteristics of the option and warrant contracts issued by the complete sample of Danish companies listed on the Copenhagen Stock Exchange. A newly constructed database containing all publicly available information on details of Danish OBC contracts allows us to present, for example, results regarding contract values at an aggregated as well as at firm, personnel group, and individual level. The paper also contains a section which discusses and presents evidence on the incentive effects provided by the option-based compensation contracts adopted by Danish listed companies.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7150
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Publisher Info
Paper provided by Copenhagen Business School, Department of Finance in its series Working Papers with number 2003-2.

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Length: 30 pages
Date of creation: 01 Sep 2003
Date of revision:
Handle: RePEc:hhs:cbsfin:2003_002

Contact details of provider:
Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark
Phone: +45 3815 3815
Email:
Web page: http://www.cbs.dk/departments/finance/
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Related research
Keywords: Option-based compensation; executive pay; disclosure requirements; valuation; incentives;

Find related papers by JEL classification:
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
G30 - Financial Economics - - Corporate Finance and Governance - - - General
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

References listed on IDEAS
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  1. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March. [Downloadable!] (restricted)
    Other versions:
  2. Brian J. Hall & Jeffrey B. Liebman, 1998. "Are CEOs Really Paid Like Bureaucrats?," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 653-691, August. [Downloadable!] (restricted)
    Other versions:
  3. Brian J. Hall & Kevin J. Murphy, 2000. "Optimal Exercise Prices for Executive Stock Options," NBER Working Papers 7548, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Carpenter, Jennifer N., 1998. "The exercise and valuation of executive stock options1," Journal of Financial Economics, Elsevier, vol. 48(2), pages 127-158, May. [Downloadable!] (restricted)
  6. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  8. Lucian Arye Bebchuk & Jesse M. Fried & David I. Walker, 2001. "Executive Compensation in America: Optimal Contracting or Extraction of Rents?," NBER Working Papers 8661, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
  10. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier. [Downloadable!] (restricted)
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