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Stock Options and Total Payout

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  • Cuny, Charles J.
  • Martin, Gerald S.
  • Puthenpurackal, John J.

Abstract

In this paper, we examine how stock option usage affects total corporate payout. Using fixed-effects panel data estimators on various samples of ExecuComp firms from 1993 to 2005, we find the higher the executive stock options, the lower the total payout, ceteris paribus. We also find some evidence that firms increase payouts through repurchases in order to offset earnings per share dilution that occurs due to usage of executive and non-executive stock options. However, incentives from not having dividend protection for options appear to dominate those from antidilution, resulting in lower total payout for firms with higher options usage.

Suggested Citation

  • Cuny, Charles J. & Martin, Gerald S. & Puthenpurackal, John J., 2009. "Stock Options and Total Payout," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(02), pages 391-410, April.
  • Handle: RePEc:cup:jfinqa:v:44:y:2009:i:02:p:391-410_09
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    Cited by:

    1. Liljeblom, Eva & Pasternack, Daniel & Rosenberg, Matts, 2011. "What determines stock option contract design?," Journal of Financial Economics, Elsevier, vol. 102(2), pages 293-316.
    2. repec:eee:corfin:v:44:y:2017:i:c:p:15-33 is not listed on IDEAS
    3. De Cesari, Amedeo & Ozkan, Neslihan, 2015. "Executive incentives and payout policy: Empirical evidence from Europe," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 70-91.
    4. Sharma, Vineeta, 2011. "Independent directors and the propensity to pay dividends," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1001-1015, September.
    5. Srivastav, Abhishek & Armitage, Seth & Hagendorff, Jens, 2014. "CEO inside debt holdings and risk-shifting: Evidence from bank payout policies," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 41-53.

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