Broad-based employee stock options grants and IPO firms

Peter Roosenboom and Tjalling van der Goot

Applied Economics, 2006, vol. 38, issue 12, 1343-1351

Abstract: This paper examines the broad-based grant of employee stock options (ESOs) in the period following the Initial Public Offering (IPO). Stock option grants are used to reduce the negative effects of conflicts of interests associated with a firm's going public. The study documents that option grants can be seen as corporate governance instruments for a number of model specifications. Also, it is found that there is a robust relation between option grants and market and accounting returns, respectively. To the best of the authors' knowledge, no previous study has investigated the determinants of the grants of employee stock options in the post-IPO period to both upper-level and lower-level executives during a period of sixteen years. Because the cross-sectional data of this study amply encompasses more than a business cycle it is possible to examine the grants of ESOs across tight and soft labour markets. During the former type of labour market it appears that more options are granted. Also, the empirical results provide evidence that option grants are an increasing function of the employees' benefits for the firm. Finally, the findings show that cash constrained firms appear to use employee stock option grants in place of cash compensation.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/00036840500396897 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:38:y:2006:i:12:p:1343-1351

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036840500396897

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().