Abstract
Purpose This study aims to investigate whether there is any influence of the option plan to purchase shares protected from dividends to determine the distribution of dividends in Brazilian companies. Design/methodology/approach The authors used a Tobit dynamic and regressive regression model because their sample has an index higher than 30% of companies that do not pay dividends. The sample includes companies that pay dividends or not and pay their executives with executive stock option plans and is composed of 1,990 observations from 356 companies from 2010 to 2016. Findings The results indicated that the presence of a dividend protection clause has a positive association with the distribution of dividends. The authors sought to clarify that companies with a stock option plan protected by the distribution of dividends face fewer restrictions on the distribution of dividends. The authors found that most companies still use only stock options to benefit middle-ranking positions and fit the plan in their remuneration policy. The monitoring of these plans lasts an average of seven years, and specific acquisition conditions are not established with their beneficiaries, who must remain in the company and observe performance metrics. Originality/value This study is relevant because the relationship between dividends and stock options has not yet been analyzed in Brazil, especially concerning a dividend-protected option plan, which is a relatively recent modality, even unknown to some companies.
Highlights
Executive compensation based on stock option plans has become an increasingly popular mechanism for top executive compensation. Marcon and Godoi (2004) define it as a system for the purchase of shares by employees linked to earnings in case there is an appreciation of the shares
In the sample’s descriptive statistics, we have the lowest value of the variable Earnings equal to zero, which refers to companies that did not distribute dividends in the period; these totaled 835 observations, which correspond to 41.96% of the sample
The results indicate that the company that holds an option plan reduces dividends payout, which corroborates the findings of the studies by Geiler and Renneboog (2016), who argue that companies that adopt the stock option plan distribute fewer dividends
Summary
Executive compensation based on stock option plans has become an increasingly popular mechanism for top executive compensation. Marcon and Godoi (2004) define it as a system for the purchase of shares by employees linked to earnings in case there is an appreciation of the shares. Executive compensation based on stock option plans has become an increasingly popular mechanism for top executive compensation. Marcon and Godoi (2004) define it as a system for the purchase of shares by employees linked to earnings in case there is an appreciation of the shares. The employee stays with the company for a certain minimum period. According to the authors, companies that have stock options to remunerate their employees perform better than companies in the same segment. The technical pronouncement CPC 10 (R1), equivalent to the international standard IFRS 2, which deals with the recognition of this type of remuneration in the financial statements of companies, defines it as an agreement between the entity and the employee that gives the According to the authors, companies that have stock options to remunerate their employees perform better than companies in the same segment. Black (2020) showed that the implementation of FAS 123 R led to a reduction in risk-taking and the implementation of projects with lower systematic risks.
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