Corporate governance and the design of stock option programs


Sautner, Zacharias ; Weber, Martin


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URL: https://ub-madoc.bib.uni-mannheim.de/2628
URN: urn:nbn:de:bsz:180-madoc-26280
Document Type: Working paper
Year of publication: 2005
The title of a journal, publication series: Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung
Volume: 05-32
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: G32 G34 M52 ,
Subject headings (SWD): Deutschland , Europäische Union , Corporate Governance , Eigentumsordnung , Aktienoptionsplan
Keywords (English): Stock Option Programs , Program Design , Corporate Governance , Empirical Evidence , European Data
Abstract: Investors and academics increasingly criticize that features of employee stock option (ESO) programs reflect rent-extraction by managers (managerial power view). We use a unique European data set to investigate the relationship between the design of ESO programs and corporate governance structures. We find that ownership structures are related to the ESO design in a way that is consistent with the managerial power hypothesis: when ownership concentration is low and the exposition to the U.S. capital market is little, executives extract rents by designing poor ESO plans. Moreover, firms with weak creditor rights more often have badly designed option plans. Our findings also suggest that ineffective board structures (insider-dominated boards) are related to ESO design in a way that supports the arguments of the self-dealing view.
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Sautner, Zacharias ; Weber, Martin (2005) Corporate governance and the design of stock option programs. Open Access Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung Mannheim 05-32 [Working paper]
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