The Theoretical Price of a Share-Based Payment with Performance Conditions and Implications for the Current Accounting Standards

Masahiro Fujimoto

Papers from arXiv.org

Abstract: Although the growth of share-based payments with performance conditions (hereafter, SPPC) is prominent today, the theoretical price of SPPC has not been sufficiently studied. Reflecting such a situation, the current accounting standards for share-based payments issued in 2004 have had many problems. This paper develops a theoretical SPPC price model with a framework for a marginal utility-based price, which previous studies proposed is the price of contingent claims in an incomplete market. This paper's contribution is fivefold. First, we restricted the stochastic process to a certain class to demonstrate how to consistently change all variables' probability distributions, which affect the SPPC payoff. Second, we explicitly indicated not only the stochastic processes of the stock price process and performance variables under the changed probability, but also how the changes in the performance variables' drift coefficients related to stock betas. Third, we proposed a convenient model in application that uses only a few parameters. Fourth, we provided a method to estimate the parameters and improve the estimation of both the price and parameters. Fifth, we illustrated the problems in current accounting standards and indicated how the theoretical price model can significantly improve them.

Date: 2018-06
New Economics Papers: this item is included in nep-acc
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/1806.05401 Latest version (application/pdf)

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:arx:papers:1806.05401

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().