IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Costs, Benefits, And Tax-Induced Distortions Of Stock Option Plans

  • Rainer Niemann
  • Dirk Simons
Registered author(s):

    In recent years stock option plans (SOPs) have become an important component of managerial remuneration in most industrialized countries. Commonly accepted corporate as well as individual taxes have a major impact on the costs of an SOP. In contrast, the influence of taxes on the benefits of an SOP remains widely unperceived. This article deals with both cost and benefit aspects simultaneously by integrating taxation into a principalagent model in which the agent is compensated in options. By deriving the optimal quantity of options to be granted and the optimal exercise price to be set, we can quantify the resulting profits for managers and shareholders. By comparing the results in a tax-free world to results that take into account different levels of taxation, we can identify several tax-induced incentive distortions.

    If 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.

    File URL: http://www.vhb.de/sbr/pdfarchive.html
    Download Restriction: no

    Article provided by LMU Munich School of Management in its journal Schmalenbach Business Review.

    Volume (Year): 55 (2003)
    Issue (Month): 4 (October)
    Pages: 321–341

    as
    in new window

    Handle: RePEc:sbr:abstra:v:55:y:2003:i:4:321-341
    Contact details of provider: Postal: Geschwister-Scholl-Platz 1, 80539 Muenchen
    Phone: 0049 89 2180 2166
    Fax: 0049 89 2180 6327
    Web page: http://www.sbr-online.com

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:sbr:abstra:v:55:y:2003:i:4:321-341. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (sbr)

    The email address of this maintainer does not seem to be valid anymore. Please ask sbr to update the entry or send us the correct address

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.