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
Citation
DING, David K. and CHEA, Ya Eem.
Executive compensation and firm performance in New Zealand: The role of employee stock option plans. (2021). Journal of Risk and Financial Management. 14, (1), 1-19.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6995
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Additional URL
https://doi.org/10.3390/jrfm14010031