Publication Type

Journal Article

Version

publishedVersion

Publication Date

1-2021

Abstract

We examine the role of employee stock option plans (ESOPs) in mitigating agency problems in New Zealand firms. We find that ESOPs have a significant and positive effect on firm performance relative to their non-ESOP counterparts. This relation appears within a year from the first ESOP announcement, and for two to four years after the announcement. Our results show that ESOPs improve corporate performance by 10 times the cost of the ESOPs’ adoption in the first year of issue. The improvement persists for four years after the first issuance. These findings confirm the effectiveness of employee stock option plans for companies issuing ESOPs compared with companies that do not issue ESOPs, and show how much the value creation of ESOPs contributes to these firms.

Keywords

Employee stock option plans, Executive compensation, Firm performance, New Zealand

Discipline

Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Risk and Financial Management

Volume

14

Issue

1

First Page

1

Last Page

19

ISSN

1911-8066

Identifier

10.3390/jrfm14010031

Publisher

MDPI

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Additional URL

https://doi.org/10.3390/jrfm14010031

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