The Experts below are selected from a list of 360 Experts worldwide ranked by ideXlab platform
Luann J Lynch - One of the best experts on this subject based on the ideXlab platform.
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the effect of Stock Option repricing on employee turnover
Social Science Research Network, 2003Co-Authors: Mary Ellen Carter, Luann J LynchAbstract:We examine whether repricing underwater Stock Options reduces both executive and overall employee turnover using a sample of firms that reprice Stock Options in 1998 and a sample of firms with underwater Stock Options that choose not to reprice. We find little evidence that repricing affects executive turnover. However, using forfeited Stock Options to proxy for overall employee turnover, we find that employee turnover in 1999 is negatively related to the 1998 repricing, suggesting that repricing helps to prevent turnover due to underwater Options. We find no evidence that the relation between turnover and repricing differs between high technology and nonhigh technology firms.
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an examination of executive Stock Option repricing
Journal of Financial Economics, 2001Co-Authors: Mary Ellen Carter, Luann J LynchAbstract:Abstract Comparing a sample of firms that reprice executive Stock Options in 1998 to a control sample of firms with out-of-the-money Options in 1998 that do not reprice, we find that the likelihood of repricing increases for young, high technology firms and firms whose Options are more out-of-the-money. Further, we find that firms reprice in response to poor firm-specific, not poor industry, performance. However, we find no evidence that repricing is related to agency problems. Our results are consistent with firms repricing Options to restore incentive effects and to deter managers in competitive labor markets from going to work for other firms.
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an examination of executive Stock Option repricing
Social Science Research Network, 2001Co-Authors: Mary Ellen Carter, Luann J LynchAbstract:In this study, we examine factors that explain firms' decisions to reprice Stock Options. Comparing a sample of firms that reprice executive Stock Options in 1998 to a control sample of firms with out-of-the-money Options in 1998 that choose not to reprice, we find that young, high technology firms are more likely to reprice than other firms. In addition, we find that the likelihood of repricing increases as Options become more out-of-the-money, and that firms reprice in response to poor firm-specific performance, not poor industry performance. These results are not consistent with claims that firms reprice to insulate management from uncontrollable industry effects. However, we find no relation between the likelihood of repricing and conflicts of interest between executives and shareholders, suggesting that repricing is not related to agency problems. The results are consistent with the often stated motivation that firms must reprice out-of-the-money Options to restore the incentive effects of those Options and to prevent management in competitive labor markets from going to work for other firms.
Volker Laux - One of the best experts on this subject based on the ideXlab platform.
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Stock Option vesting conditions ceo turnover and myopic investment
Journal of Financial Economics, 2012Co-Authors: Volker LauxAbstract:Abstract Corporations have been criticized for providing executives with excessive incentives to focus on short-term performance. This paper shows that investment in short-term projects has beneficial effects in that it provides early feedback about Chief Executive Officer (CEO) talent, which leads to more efficient replacement decisions. Due to the threat of CEO turnover, the optimal design of Stock Option vesting conditions in executive compensation is more subtle than conventional views suggest. For example, I show that long vesting periods can backfire and induce excessive short-term investments. The study generates new empirical predictions regarding the determinants and impacts of Stock Option vesting terms in optimal contracting.
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Stock Option vesting conditions ceo turnover and myopic investment
Social Science Research Network, 2011Co-Authors: Volker LauxAbstract:This paper analyzes the optimal design of Stock Option vesting conditions when the CEO faces a risk of being replaced at an interim date. First, I show that long vesting terms do not necessarily discourage but in fact can encourage short-termism. Second, the model demonstrates that the optimal vesting schedule involves balancing incentives for managerial effort with incentives for long-term investment. Due to this trade-off, overinvestment in myopic projects can arise from optimal contracting and is not necessarily an artifact of faulty pay arrangements. The study generates new empirical predictions regarding the determinants and impacts of Stock Option vesting terms in contract design.
David F Larcker - One of the best experts on this subject based on the ideXlab platform.
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proxy advisory firms and Stock Option repricing
Journal of Accounting and Economics, 2013Co-Authors: David F Larcker, Allan L Mccall, Gaizka OrmazabalAbstract:Abstract This paper examines the economic consequences associated with the board of director’s choice of whether to adhere to proxy advisory firm policies in the design of Stock Option repricing programs. Proxy advisors provide research and voting recommendations to institutional investors on issues subject to a shareholder vote. Since many institutional investors follow the recommendations of proxy advisors in their voting, proxy advisor policies are an important consideration for corporate boards in the development of programs that require shareholder approval such as Stock Option repricing programs. Using a comprehensive sample of Stock Option repricings announced between 2004 and 2009, we find that repricing firms following the restrictive policies of proxy advisors exhibit statistically lower market reactions to the repricing, lower operating performance, and higher employee turnover. These results are consistent with the conclusion that proxy advisory firm recommendations regarding Stock Option repricings are not value increasing for shareholders.
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proxy advisory firms and Stock Option repricing
Social Science Research Network, 2013Co-Authors: David F Larcker, Allan L Mccall, Gaizka OrmazabalAbstract:This paper examines the relationship between firm performance and the recommendations provided by proxy advisory firms in the United States, regarding shareholder votes in Stock Option exchange programs. Using a comprehensive sample of Stock Option exchanges announced between 2004 and 2009, we find that exchange firms following the restrictive policies of proxy advisory firms exhibit statistically lower market reaction at the announcement of this transaction, lower operating performance, and higher executive turnover. These results are consistent with the conclusion that proxy advisory firm recommendations regarding Stock Option exchanges are not value increasing for shareholders.David Larcker is a co-author of the book Corporate Governance Matters, FT Press 2011.Prior draft date: August 19, 2011Current Draft Date: April 9, 2012
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discussion of the impact of the Options backdating scandal on shareholders and taxes and the backdating of Stock Option exercise dates
Journal of Accounting and Economics, 2009Co-Authors: Christopher S Armstrong, David F LarckerAbstract:Bernile and Jarrell provide extensive analysis regarding the impact of backdating the Stock Option exercise price on Stock returns for a sample of firms identified by the Wall Street Journal. Dhaliwal, Erickson, and Heitzman investigate whether executives backdate the exercise date to obtain favorable tax consequences. This discussion comment focuses on several fundamental issues that confront researchers examining the backdating scandal and other related decisions. Specifically, we discuss the decision models for executives engaged in backdating and the potential role of social networks among directors, selection considerations, institutional voting behavior, and how backdated Options can be replicated with existing equity instruments.
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the structure of performance vested Stock Option grants
2007Co-Authors: Joseph J Gerakos, Christopher D Ittner, David F LarckerAbstract:U.S. executive compensation traditionally relies on Stock Options that vest over time. Recently, however, a growing number of institutional investors have called for the use of performance-vested Options that link vesting to the achievement of performance targets. We examine the factors influencing the structure of performance-vested Stock Option grants to U.S. CEOs. We find that performance-vested Options comprise a greater proportion of equity compensation in firms with lower Stock return volatility and market-to-book ratios, and in those with new external CEO appointments, providing some support for theories on the Options’ incentive and sorting benefits. However, firms with larger holdings by pension funds are less likely to completely replace traditional Options with performance-vested Options, and make traditional Options a greater percentage of Option grants, suggesting that token performance-vested Option grants may also be used to placate pension funds that are calling for their use. In addition, our exploratory examination of performance-vesting criteria finds similarities and differences to prior studies on the choice of performance measures in compensation contracts.
Mary Ellen Carter - One of the best experts on this subject based on the ideXlab platform.
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shareholder remuneration votes and ceo compensation design
2007Co-Authors: Mary Ellen Carter, Valentina L ZamoraAbstract:Using a sample of large UK firms from 2002 - 2006, we examine the role that shareholder remuneration votes play in executive compensation design. In particular, we investigate what aspects of CEO compensation shareholders vote against and whether corporate boards, in turn, respond to negative votes by making changes in those CEO pay elements. Prior research investigates US firms that voluntarily seek shareholder ratification of equity compensation plans and thus may suffer from self-selection bias. Conversely, the UK provides an ideal setting because remuneration votes have been required for all listed firms since 2002. Results indicate that shareholders disapprove of higher salaries, weak pay-for-performance sensitivity in bonus pay and greater potential dilution in Stock-based compensation, particularly Stock Option pay. We find some evidence that boards respond to past remuneration votes by decreasing grants of Stock Option compensation but not by changing salary or the pay-for-performance link in bonus pay accordingly.
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the effect of Stock Option repricing on employee turnover
Social Science Research Network, 2003Co-Authors: Mary Ellen Carter, Luann J LynchAbstract:We examine whether repricing underwater Stock Options reduces both executive and overall employee turnover using a sample of firms that reprice Stock Options in 1998 and a sample of firms with underwater Stock Options that choose not to reprice. We find little evidence that repricing affects executive turnover. However, using forfeited Stock Options to proxy for overall employee turnover, we find that employee turnover in 1999 is negatively related to the 1998 repricing, suggesting that repricing helps to prevent turnover due to underwater Options. We find no evidence that the relation between turnover and repricing differs between high technology and nonhigh technology firms.
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an examination of executive Stock Option repricing
Journal of Financial Economics, 2001Co-Authors: Mary Ellen Carter, Luann J LynchAbstract:Abstract Comparing a sample of firms that reprice executive Stock Options in 1998 to a control sample of firms with out-of-the-money Options in 1998 that do not reprice, we find that the likelihood of repricing increases for young, high technology firms and firms whose Options are more out-of-the-money. Further, we find that firms reprice in response to poor firm-specific, not poor industry, performance. However, we find no evidence that repricing is related to agency problems. Our results are consistent with firms repricing Options to restore incentive effects and to deter managers in competitive labor markets from going to work for other firms.
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an examination of executive Stock Option repricing
Social Science Research Network, 2001Co-Authors: Mary Ellen Carter, Luann J LynchAbstract:In this study, we examine factors that explain firms' decisions to reprice Stock Options. Comparing a sample of firms that reprice executive Stock Options in 1998 to a control sample of firms with out-of-the-money Options in 1998 that choose not to reprice, we find that young, high technology firms are more likely to reprice than other firms. In addition, we find that the likelihood of repricing increases as Options become more out-of-the-money, and that firms reprice in response to poor firm-specific performance, not poor industry performance. These results are not consistent with claims that firms reprice to insulate management from uncontrollable industry effects. However, we find no relation between the likelihood of repricing and conflicts of interest between executives and shareholders, suggesting that repricing is not related to agency problems. The results are consistent with the often stated motivation that firms must reprice out-of-the-money Options to restore the incentive effects of those Options and to prevent management in competitive labor markets from going to work for other firms.
Jamie H Pratt - One of the best experts on this subject based on the ideXlab platform.
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the evolution of Stock Option accounting disclosure voluntary recognition mandated recognition and management disavowals
The Accounting Review, 2006Co-Authors: James R Frederickson, Frank D Hodge, Jamie H PrattAbstract:In this study we report the results of an experiment that examines how relatively sophisticated financial statement users interpret management Stock Option compensation disclosures under SFAS No. 123 and SFAS No. 123R. We predict and find that mandated income statement recognition, as required under SFAS No. 123R, leads to higher user assessments of reliability than either voluntary income statement recognition or voluntary footnote disclosure, Options allowed under SFAS No. 123. Users view voluntary footnote disclosure as the least reliable reporting alternative. We also examine the amount users invest in response to these accounting treatments, and find that users invest more in a firm when management chooses income statement recognition than when management chooses footnote disclosure. We find no difference in investment amounts between mandated recognition and either voluntary recognition or footnote disclosure. Finally, although we find that these results are insensitive to whether management explici...
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the evolution of Stock Option accounting disclosure voluntary recognition mandated recognition and management disavowals
2006Co-Authors: James R Frederickson, Frank D Hodge, Jamie H PrattAbstract:In this study we report the results of an experiment that examines how relatively sophisticated financial statement users interpret management Stock Option compensation disclosures under SFAS No. 123 and SFAS No. 123R. We predict and find that mandated income statement recognition, as required under SFAS No. 123R, leads to higher user assessments of reliability than either voluntary income statement recognition or voluntary footnote disclosure, Options allowed under SFAS No. 123. Users view voluntary footnote disclosure as the least reliable reporting alternative. We also examine the amount users invest in response to these accounting treatments, and find that users invest more in a firm when management chooses income statement recognition than when management chooses footnote disclosure. We find no difference in investment amounts between mandated recognition and either voluntary recognition or footnote disclosure. Finally, although we find that these results are insensitive to whether management explicitly disavows the reliability of Stock Option expense, we present evidence that in side-by-side comparisons, where one firm disavows and the other does not, disavowals may affect user judgments and decisions.
