DO STOCK OPTION PLANS AFFECT THE FIRM’S PERFORMANCE? AN EMPIRICAL ANALYSIS ON THE ITALIAN CONTEXT

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Abstract

This study investigates the impact of stock option plans, defined as share-based incentive contracts provided by companies to their employees, on the value relevance of accounting information. The purpose of this study is to analyse the extent to which the value relevance of accounting information is affected by the adoption of stock option plans. Using panel data, the empirical analysis shows that the value relevance of accounting information is affected by the adoption of stock option plans. They are seen by the market as a “cost” and not as an opportunity or an attempt to align different interests. In addition, the research results show that the market performance does not seem affected by the design of the stock option plans. However, the firm’s market performance appears to be more related to the structure of the stock option plans in companies with a higher market capitalization. Thus further research is needed to deeper investigate the impact of the design of the stock option plans and the effect of the endogenous characters.

Keywords: Stock Option, Firm’s Performance, Italy

How to cite this paper: Giosi, A., Testarmata, S., & Caiffa, M. (2014). Do stock option plans affect the firm’s performance? An empirical analysis on the Italian context. Corporate Ownership & Control, 11(4), 81-95. https://doi.org/10.22495/cocv11i4p6