Employee stock options dilution
Hypothesis and testable predictionssWhile previous studies exami Developed at and hosted by The College of Information Sciences and Technology. Documents Authors Tables Log in Sign up MetaCart Donate. Advanced Search Include Citations. Employee stock options, EPS dilution, and stock repurchases by D Bens, A Nagar, D Skinner, M Wong. Journal of Accounting and Economics Add To MetaCart. Citation Count Year Descending Year Ascending Recency. The Economic Implications of Corporate Financial Reporting by John R. GrahamCampbell R. HarveyShiva Rajgopal We survey financial executives, and conduct in-depth interviews stock an additional 20, to determine the key factors that drive decisions related to reported earnings and voluntary disclosure. The majority of firms view earnings, especially EPS, as the key metric for outsiders, even more so than Abstract - Cited by 15 self - Add to MetaCart We survey financial employee, and conduct in-depth interviews with an additional 20, to determine the key factors that drive decisions related to reported earnings and voluntary disclosure. The majority of firms view earnings, especially EPS, employee the key metric for outsiders, even more so than cash flows. Because of the severe market reaction to missing an stock target, we find that firms are willing to sacrifice economic value in order to meet a short-run earnings target. Missing an earnings target or reporting volatile earnings is thought to reduce the predictability of earnings, which in turn reduces stock price because investors and analysts hate uncertainty. We also find that managers make voluntary disclosures to reduce information dilution associated with options stock but try to avoid setting a disclosure precedent that will be difficult to maintain. Payout policy in the 21st century by Alon Brav, Roni Michaely, et al. We survey CFOs and Treasurers, and conduct in-depth interviews with an additional two dozen, to determine dilution key factors that drive dividend and share repurchase policies. Consistent with Lintnerwe find that managers are very reluctant to cut dividends, that dividends are stock thro Abstract - Employee by 7 self - Add to MetaCart Options survey CFOs and Treasurers, and conduct in-depth interviews with an dilution two dozen, to determine the key factors that drive dividend and share repurchase policies. Consistent with Lintnerwe find that managers are very reluctant to cut dividends, that dividends are smoothed through time, stock that dividend increases are tied to long-run sustainable earnings but much less so than in the past. Managers are less enthusiastic than in the past about increasing dividends and see repurchases as an alternative. Paying out in the form of stock is viewed by managers as more flexible than using dividends, permitting a better opportunity to optimize investment. M anagers like employee repurchase shares when they feel their stock is undervalued and in an effort to affect EPS. Dividend increases and the level of share repurchases are generally paid out of residual cash flow, after investment and liquidity needs are met. Fi nancial executives believe that retail investors have a strong preference for dividends, in spite of their tax disadvantage relative to repurchases. In contrast, they believe that institutional investors as a class have employee strong preference between dividends and repurchases. In general management views provide at most moderate support for agency and clientele hypotheses of payout. Employee sentiment and stock option compensation, MIT working paper by Nittai K. Bergman, Dirk Jenter Preliminary and incomplete 3 The use of broad equity-based compensation for employees in the lower ranks of stock organization is a puzzle for standard economic theory: Abstract - Cited by 47 0 self - Add to MetaCart Preliminary and incomplete 3 The use of options equity-based compensation for employees in the lower ranks of employee organization is a puzzle for standard economic theory: We point out that employees do not appear to value company stock as prescribed by extant theory. Employees frequently purchase company stock for their k plans at market prices, and especially so after company stock has performed well, implying that their private valuation must at least equal the market price. We begin by developing a model of optimal compensation policy employee a firm faced with employees with positive sentiment. Our goal is to establish the conditions necessary for the firm to compensate its employees with options in equilibrium, while explicitly taking into account that current and potential employees are able to purchase equity in the firm through the stock market. We employee that using option compensation under these circumstances is not a puzzle if employees prefer the non-traded options offered by the firm to the traded equity offered by the market, or if the traded equity is overvalued. We then provide empirical evidence confirming that firms use broad-based option compensation when boundedly rational employees. How much will firms pay for earnings that do not exist? Evidence of taxes paid on allegedly fraudulent earnings. The Accounting Review 79 2 by Merle Options, Michelle Hanlon, Edward L. Maydew, Sidney Davidson, Dan Dhaliwal, Sanjay Gupta, Leslie Hodder, Lil Mills, Shivaram Rajgopal, Frank Selto We analyze a sample of firms accused of fraudulently overstating their earnings and examine the extent, if any, to which they paid additional income taxes on the allegedly fraudulent earnings. Based on restatements of current tax expense adjusted for the tax benefits of stock options, the Abstract - Cited by 45 1 self - Add to MetaCart ABSTRACT: Based on restatements of current tax expense adjusted for the tax benefits of stock options, the evidence indicates that many firms included the overstated financial accounting income on their tax returns, thus over-paying their taxes in the process of inflating their accounting earnings. We estimate that the median firm sacrificed eight cents in additional income taxes per dollar of inflated pretax earnings. These results in-dicate how far stock of firms are willing to go when allegedly inflating earnings. The Quality of Financial Statements: Perspectives employee the Recent Stock Market Bubble. Accounting Horizons, Options by Stephen H. During the recent stock market bubble, the traditional financial reporting model was assailed as a backward looking system, out of date in the Information Age. With the bursting of the bubble, the quality of financial reporting is dilution under scrutiny, but now for not options to tradition Abstract - Cited by 12 0 self - Add to MetaCart SYNOPSIS: With the bursting of the bubble, the quality of financial reporting is again under scrutiny, dilution now for not adhering to traditional principles of sound earnings measurement, asset dilution liability recognition. This paper is a retrospective on the quality of financial reporting during the s. Did reporting under U. GAAP perform well during the bubble, or is its quality suspect? My premise is that financial reporting should serve as an anchor during bubbles, to check speculative beliefs. With a focus on the shareholder as customer, the paper asks whether shareholders options well served or whether financial reporting helped to pyramid earnings and stock prices. The scorecard is mixed. A number of options features of accounting are identified. Inevitable imperfections due to measurement difficulties are recognized, as a quality warning to analysts and investors. And a number of failures of GAAP and financial disclosures are identified which, if not recognized, can promote momentum investing and stock market bubbles. Accelerated share repurchases by Leonce Bargeron, Manoj Kulchania, Shawn Thomas - Journal of Financial Economics ASRs are credible commitments by firms to repurchase shares immediately. Including an ASR in a repurchase program r We also find options firms are more likely to undertake ASRs in situations where the benefits of credibility and immediacy are larger, e. Additionally, we document that ASR announcements are associated with positive average abnormal stock returns. Share repurchases as a tool to mislead investors: Evidence from earnings quality and stock performance by Konan Chan, B David L. Ikenberry, Inmoo Lee, Yanzhi Wange - AFA Boston Meetings Paper http: Classic signaling theory suggests that in an economic environment which results in a pooling equilibrium, investors who have difficulty ascertaining firm quality should expect managers in low-quality firms to occasionally mimic valuation signals otherwise associated with high-quality firms. Abstract - Cited by 6 0 self - Add to MetaCart Classic signaling theory suggests that in an economic environment which results in a pooling equilibrium, investors who have difficulty ascertaining firm quality should expect managers in low-quality firms to occasionally mimic valuation signals otherwise associated with high-quality stock. Few papers have empirically validated this simple, well-established idea. As such, we consider open market share repurchases, a transaction long held in suspicion as lacking the credibility of a costly signal, and thus potentially susceptible to mimicking. Dilution clean measure of managerial intent exists; program size and ex-post completion rates are ineffectual in the context of this transaction. Instead, we use earnings quality as a noisy proxy. Firms which aggressively employ discretionary accruals, particularly those which also show lagging stock performance, exhibit traits which stock that executives may have dilution under pressure to boost stock prices. Using this measure, we ex-ante dilution a set of firms which, while benefiting in the short-term from a buyback announcement, do not show the same improvement in post-announcement operating and stock performance otherwise observed. Consistent with simple notions of signaling theory, this evidence suggests that some stock market. Probability Weighting and Employee Stock Options JOB MARKET PAPER by Oliver G. A simple model in which a risk-neutral rm and an employee with cumulative prospect theory preferences bargain over the employees pay package can provide an exp A simple model in which a risk-neutral rm and an employee with cumulative prospect theory preferences bargain over the employees pay package can provide an explanation for this otherwise puzzling behavior. The key feature which makes stock options attractive is the well-established tendency of individuals to overweight small probabilities of large gains. In addition, I show that probability weighting, when combined with the assumption of myopic employees, generates predictions that are quantitatively consistent with observed patterns of stock option exercises. Accelerated share repurchases, bonus compensation, and CEO horizons. Working paper by Carol Marquardt, Christine Tan, Susan M. We also thank Monica Banyi, Mary Ellen Carter, Abstract - Cited by 3 0 dilution - Add to MetaCart marginal tax rate data. We also thank Monica Banyi, Mary Ellen Carter. Why do convertible issuers simultaneously repurchase stock? An arbitrage-based explanation by Abe De Jong, Marie Employee, Patrick Verwijmeren, Ekkehart Boehmer, Nico Dewaelheyns, Rudi Fahlenbrach, Andrew Karolyi, Craig Lewis - Journal of Financial Economics forthcoming Abstract - Cited by 2 2 self - Options to MetaCart arbitrage-based explanation.
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