Stock Options and Total Payout

35 Pages Posted: 14 Nov 2005 Last revised: 15 Mar 2018

See all articles by Charles J. Cuny

Charles J. Cuny

Washington University in St. Louis - John M. Olin Business School

Gerald S. Martin

American University - Kogod School of Business

John Puthenpurackal

University of Nevada, Las Vegas - Department of Finance

Date Written: 2009

Abstract

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.

Keywords: Dividends, payout, executive compensation, incentives, stock options, share repurchases, issuances, earnings dilution

JEL Classification: G30, G32, G35, J33, M52

Suggested Citation

Cuny, Charles J. and Martin, Gerald S. and Puthenpurackal, John, Stock Options and Total Payout (2009). Journal of Financial and Quantitative Analysis, 44, April 2009, 391-410, Available at SSRN: https://ssrn.com/abstract=847205 or http://dx.doi.org/10.2139/ssrn.847205

Charles J. Cuny

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
(314) 935 4527 (Phone)

Gerald S. Martin

American University - Kogod School of Business ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-3914 (Phone)

John Puthenpurackal (Contact Author)

University of Nevada, Las Vegas - Department of Finance ( email )

4505 S. Maryland Parkway
Box 456008
Las Vegas, NV 89154-6008
United States

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