Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10476109 | Journal of Financial Economics | 2005 | 27 Pages |
Abstract
In May 1997, the Japanese Commercial Code was amended to allow firms to begin granting stock options as compensation to top management and employees. Nearly 350 firms adopted option-based compensation plans between 1997 and 2001. These options typically have five-year lives and are out-of-the-money by about 5% at the grant date. Firms exhibit abnormal stock returns of about 2% around the announcements of plan adoptions. We find improvements in operating performance and observe that dividend policy and volatility remain unchanged post-adoption. Our evidence suggests that well-designed incentive compensation plans are consistent with the creation of shareholder value.
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Accounting
Authors
Hideaki Kiyoshi Kato, Michael Lemmon, Mi Luo, James Schallheim,