Stock Options and Total Payout
Charles J. Cuny
Washington University in Saint Louis - John M. Olin Business School
Gerald S. Martin
American University - Kogod School of Business
University of Nevada, Las Vegas - Department of Finance
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
In this paper, we examine how stock option usage affects total corporate payout. Using fixed-effects panel data estimators on various samples of Execucomp firms from 1993 to 2005, we find the higher the executive stock options, the lower the total payout, ceteris paribus. We also find some evidence that firms increase payouts through repurchases in order to offset EPS dilution that occurs due to usage of executive and non-executive stock options. However, incentives from not having dividend protection for options appear to dominate that of anti-dilution, resulting in lower total payout for firms with higher options usage.
Number of Pages in PDF File: 35
Keywords: Dividends, payout, executive compensation, incentives, stock options, share repurchases, issuances, earnings dilution
JEL Classification: G30, G32, G35, J33, M52
Date posted: November 14, 2005 ; Last revised: May 14, 2008
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