Research on the Determinant and Economical Consequence of Employee Stock Option

Abstract

Abstract:

Based on 410 listed firms that announced stock option plans during the period from July 1, 2005 to Dec. 31, 2012, this paper study the determinant and economical consequence of employee stock option(EOS). There are three theories for the determinant, which are to create incentives for employees, to attract and retain employees, and financing constraints. The result of full sample and private-owned enterprises indicates that, the second and the third theory could offer strong explanation while the first theory's explanation is weak. For state-owned enterprises, all of the three theories could not explain it well. For economical consequence, there is no consensus in theory now. The paper examines economical consequence by testing market reaction and sales growth. A simple comparison about market reaction reveals that EOS has weak negative impact. Nevertheless, other tests find no relation between EOS and economical consequence.

Key words: employee stock option, determinant, economical consequence

Chen Yanyan. Research on the Determinant and Economical Consequence of Employee Stock Option[J]. , 2015, 27(9): 163-176.

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