Stock option compensation and equity values

Panu Kalmi ()
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Panu Kalmi: Helsinki School of Economics

Economics Bulletin, 2006, vol. 10, issue 2, 1-8

Abstract: I present a model where increasing employee participation in a stock option scheme leads to higher performance but with a cost to shareholders. I show that firms with higher market values per employee are more likely to have an option scheme and they offer stock options to a broader group of employees. The model yields empirical predictions that are consistent with the stock option boom of the late 1990s and their reduced popularity after the stock market decline.

Keywords: compensation (search for similar items in EconPapers)
JEL-codes: J3 (search for similar items in EconPapers)
Date: 2006-03-08
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