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Article
Publication date: 22 February 2011

Menachem Abudy and Simon Benninga

This paper aims to derive firm value implications for various kinds of employee stock options (ESOs) in a framework that considers uncertainty, non‐diversification and the US…

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Abstract

Purpose

This paper aims to derive firm value implications for various kinds of employee stock options (ESOs) in a framework that considers uncertainty, non‐diversification and the US statutory tax treatment.

Design/methodology/approach

The authors extend the analysis of ESOs from the case of perfect capital markets to two cases of imperfect capital markets using the Benninga‐Helmantel‐Sarig framework.

Findings

It is found that ESOs are inferior to cash compensation and that the degree of option inferiority depends on employee diversification. In addition, incentive stock options (ISOs) are generally inferior to non‐qualified stock options (NSOs). This relative profitability of the NSO versus ISO increases as market imperfections are added. The authors also find that in general firm hedging of ESOs is suboptimal.

Originality/value

The paper highlights the firm value of employee stock options.

Details

International Journal of Managerial Finance, vol. 7 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

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Book part
Publication date: 1 October 2015

Menachem (Meni) Abudy and Beni Lauterbach

We examine changes in controlling shareholder holdings, looking for evidence of financial tunneling (unfair wealth transfers from public investors to controlling shareholders)…

Abstract

We examine changes in controlling shareholder holdings, looking for evidence of financial tunneling (unfair wealth transfers from public investors to controlling shareholders). Our sample comprises yearly data during 2000–2011 on 75 large Israeli companies. We find that controlling shareholders are successful in timing the stock market – there exists a significant negative correlation between changes in the mean controlling shareholders’ equity holdings and market return. There is also some evidence that controlling shareholders increase (decrease) their holdings before years of positive (negative) excess returns in their shares. However, statistically significant mean excess returns are documented only after decreases in controlling shareholders’ holdings. Thus, we offer only limited support for the financial tunneling hypothesis.

Details

International Corporate Governance
Type: Book
ISBN: 978-1-78560-355-6

Keywords

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Book part
Publication date: 1 October 2015

Abstract

Details

International Corporate Governance
Type: Book
ISBN: 978-1-78560-355-6

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Article
Publication date: 21 November 2014

24

Abstract

Details

The Journal of Risk Finance, vol. 15 no. 5
Type: Research Article
ISSN: 1526-5943

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