Employee Stock Option Plans Research Articles

Pengaruh Penerapan Employee Stock Option Plan (Esop) Terhadap Kinerja Perusahaan Dan Nilai Perusahaan Dengan Profitabilitas Sebagai Variabel Moderasi

The Employee Stock Option Plan (ESOP) is a share ownership program implemented in the company, this ESOP program aims to serve as a reward for employees who have good performance where the criteria for receiving this ESOP have been determined by each company, United States of America. is the first country to implement this ESOP program, with various benefits for employees through this share ownership program, the ESOP itself began to be implemented by certain companies in Indonesia regulated by PSAK No. 53 which according to PSAK, payments by companies to employees are not only in the form of monetary value but can be in the form of share options that can be used as opportunities by companies that aim to increase employee motivation, performance and loyalty to the company which will ultimately have an impact on the value of the company itself. In Indonesia, company management has its own rules in the process of implementing the ESOP, one of which is to use the vesting method, this method contains that every employee who receives the option right is prohibited from selling his shares unless requested by the company or an employee has retired. From the results of statistical tests whether the variable current ratio (X1) and Price Book Value (X2) have an effect if the company carries out the ESOP program but the results show that if a company implements the ESOP, it has no effect on the current ratio or price book value, but the existence of ESOP can strengthen these ratios. Variable current ratio, price book value and return on assets have an effect on the ESOP only 33%.

Employee behavior in employee stock option plans: Why do some employees acquire company stock?

AbstractThe article focuses on decisions to exercise and hold company stock at the maturity of a broad‐based employee stock options plan. It investigates why some participants choose an uncertain and risky future reward when an immediate and certain increase in wealth could be secured at exercise. It draws on and expands the “mixed gambles” perspective in behavioral agency theory, utilizing a combination of stock price data and employee survey data from British companies with tax‐approved stock option plans. It is found that the decision to take a gamble is influenced (negatively) by the extent of stock price lows (relative to prices at exercise) in the year prior to exercise, and by the risk preferences of the option holder. The findings contribute to further development of the “mixed gambles” perspective as an explanation of stock option behavior, showing that individual characteristics as well as some stock price movements affect behavior.

Influence of Behavioral Factors on Early Exercise of Employee Stock Option: A Literature Review

Employee Stock Option Plans (ESOPs) have gained prominence as a successful HR strategy that improves the employees’ performance and enables the company to have an economic and strategic advantage. However, the time at which employees decide to exercise their options determines the incentive that they derive from the stock options granted to them. It is one of the crucial financial decisions which can have immense implications for both employers and employees. According to the Black Scholes Model, an option's value is maximum when it is held until maturity. But most employees exercise their options early, which comes with a cost to both the employee and the company. It can be attributed to the fact that when faced with financial decisions the individuals do not always refer to complex finance models and formulas and make decisions rationally. Instead they resort to mental accounting and shortcuts leading to bounded rationality that can unconsciously impact their decision-making process. This paper explores the literature available on behavioral factors and biases that in addition to rational factors can affect the exercise of employee stock options.

Impact of Employee Stock Ownership Plans on Productivity in Video Game Companies

The article deals with the importance of ESOPs (employee stock option plan) for the motivation of key employees of companies producing and publishing computer games. The conducted literature review led to the identification of a motivation model that explains how ESOPs can affect the motivation of employees in this industry. An analysis of the available studies on the importance of ESOPs for employee motivation revealed the existence of at least one key success factor of ESOPs—psychological ownership. The empirical study includes an ESOP analysis of five computer game companies listed on the Warsaw Stock Exchange in terms of changes in the dynamics of employee productivity caused by an ESOP. One of the most important discoveries is the relationship between productivity and the structure of the ESOP, in particular the percentage of company shares that were offered to its participants.

The Optimization Of Employee Stock Option Plan In Achieving Financial Performance

This study aimed to examine the effects of Intellectual Capital proxied by Human Capital (HC), Structural Capital (SC), and Customer Capital (CC) on the company's financial performance. It also investigated stock-based compensation's impact through employees' stock options programs and Intellectual Capital on the company's economic performance. The research samples were 36 companies that implemented the Employee Stock Option Plans as a compensation scheme during the 2016-2019 period. There were 144 observations. The partial test used multiple regression, while the moderating variable test applied residual analysis by examining the effect of deviation from a model. As a result, this study indicated that Human Capital partially influenced its financial performance. Stock-based compensation impacts the effect of Human Capital on financial performance. The shares ownership of employees with competencies, knowledge, skills, and behavior will support organizational structures' optimization in achieving work performance. Human capital is the source of innovation and knowledge that can solve a company’s problems. The implication of this research is that information about intellectual capital (Human Capital, Structural Capital, and Employee Capital) is needed by the company to determine the effectiveness of implementing the employee stock option plan in achieving better wealth in the future.

Executive Compensation and Firm Performance in New Zealand: The Role of Employee Stock Option Plans

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.

Kinerja Perusahaan sebagai Pemediasi Pengaruh Penerapan Employee Stock Option Plan (ESOP) pada Nilai Perusahaan

Limited liability company (Ltd) based on a contract cooperative relationship which is the basis of agency theory with the risk of conflict. The solution to minimize is the employee stock ownership program with the Employee Stock Option Plan (ESOP) strategy. The purpose of this study is to obtain empirical evidence of the relationship of stock options granted’s number to the firm value through firm performance. This research was conducted at companies listed in the BEI and conducted ESOP grants in 2014-2018. Samples obtained using purposive sampling were 48 observations. Data analysis technique used is path analysis. The results showed that the number of stock options granted had a positive effect on firm performance, firm performance had a positive effect on firm value, the number of shares options granted had a positive effect on firm value, and firm performance mediated the relationship between the number of shares options granted and firm value.
 Keywords: Employee Stock Option Plan; Firm Performance; Firm Value.

Employee Stock Option Plans: A Meta-Analysis (Understanding Impact of Esops Through Literature)

Abstract The usage of psychological ownership as an HR practice has been of a relatively recent origin. It is fast being recognized as a useful tool in the area of human resource management. Employee Stock Option Plans are being used as a technique to propagate psychological ownership and gain many advantages including a competitive edge. This paper explores the available literature on psychological ownership in general and Employee Stock Option plans in particular over a thirty year period from 1988 till 2018. An attempt has been made to integrate all matter into a theoretical model indicating the effect of such plans on individuals and organizations. In the study, several empirical as well as theoretical papers have been studied and the impact of Employee Stock Option Plans on several parameters like organizational productivity, individual performance, absenteeism, employee turnover and organizational citizenship behaviour have been reported. Several job attitudes like job satisfaction and commitment of employees towards their organization have also been reported. The studies reporting conditions of these plans that make them successful have been covered comprehensively.

Serbia Introduces New Tax Incentives to Boost the Knowledge-Based Economy

In this article, the authors examine recently introduced legislative amendments in Serbia establishing a tax incentive regime for the knowledge-based economy. With the aim of supporting businesses doing R&D in Serbia, the following tax incentives were instituted: an IP box, double deduction of R&D expenditures, a tax credit for investments in innovative start-ups and a beneficial treatment of employee stock option plans. This article analyses these incentives in detail.

Evaluating the Effect of Employee Stock Option Plans on the Financial Performance of Indian Construction and Infrastructure Companies

Competitive pressures to improve productivity continue to place significant demand upon organizations globally. To respond to these competitive pressures with the developed countries like USA, ESOPs (Employee Stock Ownership Plans) have also been adopted in developing country like India to increase the firm’s and employee’s performance and productivity by retaining the employees to a large extent. Employee Stock Ownership Plans are majorly utilized by many successful and competent companies across the world. The successes of the ESOP companies in countries like USA, Japan and UK etc. may largely be attributed to enhancement of firm’s performance and Employee productivity. These effects are becoming increasingly noticed across the world in recent years. Thus, this research is an empirical study carried out to evaluate the impact of ESOP on financial performance of ten listed Indian Construction and Infrastructural companies based on for a period of six years. The study analyzes three years pre and post period to the adoption of ESOPs for the selected companies and is based upon secondary data collected from company annual reports of the respective years. Company-wise Pre- and Post-ESOP adoption Analysis and Regression Analysis is carried out in the selected selector.

Transaction Costs, Option Prices, and Model Risk in Fair Value Accounting

This paper examines the reliability of option fair value estimates in the presence of transaction costs. The Black Scholes Merton (BSM) framework assumes zero transaction costs and thus might not provide a reasonable approximation in this context. We investigate the model adjustments companies make to their BSM models to deal with these transaction costs. We specifically examine Employee Stock Option (ESO) plans listed on the French stock exchange, as detailed disclosure on modeling is available for these ESOs. Our analysis questions the reliability of these model adjustments, especially their bias and the extent to which they provide a faithful representation of option fair values. Holding parameter values constant, we find that the model adjustments lead to a median understatement of 52% compared to the BSM model price, higher than the discount we observe for the opportunistic determination of model parameters (below 20%). The paper contributes to the fair value literature by highlighting model risk in the fair valuation of options. This model risk stems from assumptions made about the size of transaction costs and complements the notion of parameter risk analyzed in previous literature. As a result, the model itself might be a possible channel for fair value management.

Entrepreneurs’ Legal Status Choices and the C Corporation Survival Penalty

Foundational to the American Dream is the ability to easily and rapidly start a new business. Over the past quarter century, the introduction of the limited liability company (LLC) dramatically shifted and complicated the choice-of-legal-status calculus for entrepreneurs, and in its wake a consensus against the use of traditional C corporations by closely-held firms emerged. The C corporation, scholars argued, had fatal drawbacks despite its simplicity: tax disadvantages as well as governance inflexibility. Due to historically limited sources of data, there has been little empirical research on choice-of-entity generally and none that explores the anti-C corporation thesis in particular. Have C corporations underperformed as compared to similarly situated businesses with alternative legal statuses? This paper exploits a large panel dataset that contains legal status, owner, business, financing, and other firm-specific information collected from an eight-year survey of nearly 5,000 enterprises that were formed in 2004. It presents four main results. First, C corporation status is associated with firm failure rates that are 38 percent higher (significant at 0.1 percent) than those of non-C corporations with similar characteristics. Second, this C corporation survival penalty persists at nearly the same magnitude and significance even after a subset of “anticipated cash-exit” C corporations with (a) venture capital investors or (b) employee stock option plans are separated out. Third, nonwhite and foreign-born entrepreneurs have a significantly higher likelihood of choosing C corporation status. Fourth, within the subset of firms that appear eligible to elect out of the default (Subchapter C) corporate tax classification and into the tax-advantaged Subchapter S classification, nonwhite and older entrepreneurs are significantly more likely to remain in C corporation status. These findings suggest that increasing legal status complexity is unlikely to be neutral from a distributive perspective, and may be disproportionately burdensome for marginalized entrepreneurs.

Evaluating the Effect of Employee Stock Option Plans on the Financial Performance of Indian Construction & Infrastructure Companies

Competitive pressures to improve productivity continue to place significant demand upon organizations globally. To respond to these competitive pressures with the developed countries like USA, ESOPs (Employee Stock Ownership Plans) have also been adopted in developing country like India to increase the firm’s and employee’s performance and productivity by retaining the employees to a large extent. Employee Stock Ownership Plans are majorly utilized by many successful and competent companies across the world. The successes of the ESOP companies in countries like USA, Japan and UK etc. may largely be attributed to enhancement of firm’s performance and Employee productivity. These effects are becoming increasingly noticed across the world in recent years. Thus, this research is an empirical study carried out to evaluate the impact of ESOP on financial performance of ten listed Indian Construction and Infrastructural companies based on for a period of six years. The study analyzes three years pre and post period to the adoption of ESOPs for the selected companies and is based upon secondary data collected from company annual reports of the respective years. Company-wise Pre- and Post-ESOP adoption Analysis and Regression Analysis is carried out in the selected selector.

DAMPAK STRUKTUR MODAL PADA SENSITIVITAS PENERAPAN KOMPENSASI OPSI SAHAM KARYAWAN TERHADAP KINERJA

This study aims to test whether the management that receive compensation in the form of stock options having an positive impact on company performance. This study considers the external performance measurement by identifying Cumulative Abnormal Return (CAR). In addition, this study aims to test whether the company's capital structure affects the sensitivity level of employee stock option compensation and firm performance. Capital structure is measured with debt to equity ratio. The result indicates that the proportion of Employee Stock Option Plan (ESOP) influence company performance in accordance with the predictions. This shows that the more stock options offered to employees then came a sense of belonging which resulted in more motivated managers to improve company performance. Furthermore, the higher the market performance of companies that can be achieved, the higher the profit (gain) will be obtained by the recipient of stock options. In addition, this study also shows that the impact of stock option grants at the company's performance declined with the greater capital structure of liability. This shows that the capital structure of liabilities will lower the sensitivity level of employee stock option compensation and firm performance. The higher the company's liabilities would reduce the rights of the owner of the dividends each period in accordance with the ownership of shares held since the company must take into account the interest costs to be paid to the creditor.

ANALYSIS OF ESOP IMPLEMENTATION DETERMINANTS AT COMPANIES IN INDONESIA

Employee stock option plan (ESOP) represents one of the compensation forms conducted by a company to overcome the agency cost problems. The objective of this study is to analyse the ESOP implementation determinants. They include total assets (TA), debt to equity ratio (DER), market to book value ratio (MBR), growth, current ratio (CR), and time interest earned ratio (TIER) on the implementation of ESOP for companies in Indonesia. The population of the research was all of the companies which implement the ESOP and which are listed on Indonesia Stock Exchange (IDX). Its samples were 34 companies. The result of this study shows that the company size, leverage, growth, and liquidity has a significantly negative effect on the ESOP implementation. The enterprises which valued from the MBR and TIER have a significant positive effect on the ESOP implementation.

Benefits of Employee Stock Option Plan to Multinational Corporations: A Comprehensive Review

Relations among worker possession, fulfillment, and wanted impact are more mind boggling than assumed. Worker proprietors ’fulfillment with the firm and their occupations depends, to a limited extent, on their impression of the company's monetary execution and of the viability of different representatives. Disappointment may expand endeavors by representative proprietors to impact basic leadership. What empowers some representative possession firms to beat the free rider issue and propel workers to enhance execution? This investigation breaks down the part of human asset approaches in the execution of ESOP firms, utilizing worker overview information from 13 organizations. Inter-firm analysis of 11 ESOP firms demonstrate that a record of human asset approaches, ostensibly controlled by administration, is identified with representative reports of colleague execution and other great working environment results. Inside firm correlations in two firms demonstrate that specialists who take an interest in representative inclusion boards of trustees will probably apply peer weight on evading collaborators. This paper reasons that a comprehension of how and when representative proprietorship functions effectively requires a three-pronged investigation of: the impetuses that possession gives, the participative systems accessible to specialists to follow up on those motivators and the corporate culture that fights against propensities to free ride. ESOPs can possibly adjust the interests of representatives and proprietors and may build firm esteem. Be that as it may, worker possession may likewise fortify the position of settled in administration. The writing predicts that organizations recently shielded from takeover risk will tend to increment long haul speculation and require extra outside checking, or potentially may utilize use as a component of a general antitakeover procedure. This paper inspected firms that have embraced ESOPs and find that organizations raise the level of capital consumptions, innovative work uses, and profits.

A Review of Employee Stock Option Plans: Panacea or Pandora’s Box for Firm Performance

Employee stock option Plans (ESOPs) have gathered enormous attention in recent decades and have become the most controversial component of the compensation package. Organizations around the globe have been using ESOPs to compensate their employees at managerial and non-managerial levels. While traditionally the stock options were reserved for top management employees, lately there has been strong growth of broad-based plans primarily to increase firm value. Recent literature examining the effects of broad-based stock options are not limited to executive but available for all employees (Core and Guay, 2001; Oyer and Schaefer, 2005; Hallock and Olson, 2010, etc.). However, the shareholders have become increasingly apprehensive about the size and proliferation of adoption of stock option plans. Accordingly, they have been an issue of debate in both academic research and practice circles. The present paper outlines the theoretical foundations behind the use of ESOPs in the compensation mix and strives to address the controversy of whether or not stock options adoptions result in enhancement in firm value. Though the evidence is mixed on the implications of ESOPs, however, there exists robust support for a positive interrelationship between the adoption of these plans and firm performance for large sized firms.

A Review of Employee Stock Option Plans: Panacea or Pandora’s Box for Firm Performance

Employee stock option Plans (ESOPs) have gathered enormous attention in recent decades and have become the most controversial component of the compensation package. Organizations around the globe have been using ESOPs to compensate their employees at managerial and non-managerial levels. While traditionally the stock options were reserved for top management employees, lately there has been strong growth of broad-based plans primarily to increase firm value. Recent literature examining the effects of broad-based stock options are not limited to executive but available for all employees (Core and Guay, 2001; Oyer and Schaefer, 2005; Hallock and Olson, 2010, etc.). However, the shareholders have become increasingly apprehensive about the size and proliferation of adoption of stock option plans. Accordingly, they have been an issue of debate in both academic research and practice circles. The present paper outlines the theoretical foundations behind the use of ESOPs in the compensation mix and strives to address the controversy of whether or not stock options adoptions result in enhancement in firm value. Though the evidence is mixed on the implications of ESOPs, however, there exists robust support for a positive interrelationship between the adoption of these plans and firm performance for large sized firms.

The Role of Employee Stock Option Plan to Reduce Earnings Management Actions

This research aimed to investigate the influence of earnings management to the compensation of the Employee Stock Option Plan (ESOP). Taking agency theory to explain theconflict between managers and shareholders. It was expected that ESOP would increasethe managerial responsibility to companies, but the managers have abused it to gainmore benefits for themselves. This research used simple linear regression and multiplelinear regression analysis with a sample of 120 publicly traded companies listed on theStock Exchange during 2011-2014. This study had one independent variable (ESOP) and controls four variables (managerial ownership, institutional ownership, the board of directors and audit committees). The result of this study was that earnings management had a positive impact on improving employee compensation due to the ESOP program. The existenceof managerial ownership and commissioners could reduce earnings managementactions in the implementation of the ESOP. DOI : https://doi.org/10.26905/jkdp.v21i3.1281

American GARCH Employee Stock Option Valuation

We implement a new and flexible simulation based approach for the fair value of Employee Stock Option (ESO) plans to value American options in order to consider the common ESO characteristics of vesting period, departure risk and voluntary suboptimal early exercise. We introduce GARCH effects on the underlying asset and we analyze the price bias with respect to the constant volatility case. We also find a significant bias if we value the ESO using a short-memory GARCH model instead of a long-memory one. We also develop a sensitivity analysis with respect to changes in several ESO characteristics. We compare this valuation with FAS 123 method using the implicit expected life of the ESO revealing a FAS overvaluation. Finally, we value a real ESO plan providing the confidence intervals for the estimated ESO prices.