Non-executive Employee Stock Options and Corporate Innovation
Nanyang Business School
Nanyang Technological University (NTU)
Nanyang Technological University - Division of Banking & Finance
Xiamen University - Institute for Financial and Accounting Studies
Midwest Finance Association 2013 Annual Meeting Paper
We provide empirical evidence on the positive effect of non-executive employee stock options on corporate innovation. The positive effect is more pronounced when employees are more important for innovation, when free-riding among employees is weaker, when options are granted broadly to most employees, when the average expiration period of options is longer, and when employee stock ownership is lower. Taken together, our results are consistent with the view that stock options granted to non-executive employees increase risk-taking incentive, enhance failure-bearing capacity, encourage long-term commitment, and promote teamwork of employees, leading to greater innovation success.
Number of Pages in PDF File: 46
Keywords: Employee Stock Options; Corporate Innovation; Risk-taking Incentives; Employee Compensation
JEL Classification: J33, M52, O31working papers series
Date posted: November 21, 2011 ; Last revised: March 26, 2013
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