Market valuation and employee stock options
This paper investigates a market-valuation-based hypothesis for employee stock options (ESOs). It examines how market valuation has affected the decision to grant ESOs, the amount of options granted, and the distribution of options among executives and rankand- file employees. I find strong empirical evidence that firms with high market valuation and high probability of future overvaluation are more likely to adopt ESOs and grant more options to their employees. Furthermore, when top executives perceive that the current market valuation is high, they grant a smaller portion of options to themselves relative to rank-and-file employees. All these results are consistent with the market-valuation rationale for ESOs, which argues that firms use ESOs as a method to sell overvalued equity.
|Date of creation:||27 Jan 2004|
|Date of revision:|
|Contact details of provider:|| Postal: New Orleans, Louisiana 70148|
Phone: (504) 280-6485
Web page: http://www.uno.edu/~coba/econ/index.html
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:uno:wpaper:2003-13. 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: (Janet Murphy Crane)
If references are entirely missing, you can add them using this form.