Stock Option Expensing: Evidence from Shareholders' Votes

Posted: 17 Oct 2005

See all articles by Fabrizio Ferri

Fabrizio Ferri

University of Miami - Miami Business School; European Corporate Governance Institute

Garen Markarian

HEC - University of Lausanne

Tatiana Sandino

Harvard Business School - Accounting and Control

Abstract

In the 2003 and 2004 proxy seasons the Securities Exchange Commission allowed shareholders' proposals to expense employee stock options to be voted upon at the annual meeting. We analyze the determinants of shareholders' votes for a sample of 107 firms. We hypothesize and find that votes for expensing are higher in firms with perceived excessive option compensation and lower expected earnings impact from expensing. Insiders' ownership is positively associated to votes against, while most types of institutional investors tend to vote for expensing. Finally, votes for are higher in larger firms, with higher interest coverage, higher leverage and lower returns.

Suggested Citation

Ferri, Fabrizio and Markarian, Garen and Sandino, Tatiana, Stock Option Expensing: Evidence from Shareholders' Votes. AAA 2005 FARS Meeting Paper, Available at SSRN: https://ssrn.com/abstract=590349 or http://dx.doi.org/10.2139/ssrn.590349

Fabrizio Ferri (Contact Author)

University of Miami - Miami Business School ( email )

Coral Gables, FL 33146-6531
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Garen Markarian

HEC - University of Lausanne ( email )

UNIL Dorigny
Lausanne, Lausanne 1015
Switzerland

Tatiana Sandino

Harvard Business School - Accounting and Control ( email )

367 Morgan Hall
Soldiers Field
Boston, MA 02163
United States
617-495-0625 (Phone)

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