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| Author: | Aboody, D. Johnson, N.B. Kasznik, R. |
| Title: | Employee stock options and future firm performance: Evidence from option repricings |
| Journal: | Journal of Accounting & Economics
2010 : MAY, VOL. 50:1, p. 74-92 |
| Index terms: | stock options performance appraisal option valuation employees executives incentives |
| Language: | eng |
| Abstract: | This paper examines firms' operating performance subsequent to the repricing of executive and non-executive employee stock options. It is found that, relative to non-repricers, repricing firms have a larger increase in operating income and cash flows in subsequent periods. The performance improvement is attributable to the underlying economic determinants of the decision to restore the options' incentive properties. Nonetheless, only repricings of executive stock options are associated with improvement in performance; no such evidence is found for non-executive employess. The findings suggest that employee stock options provide sufficiently large incentive effects to favorably affect firms' performance, but primarily so at the executive level. |
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