What Determines Early Exercise of Employee Stock Options in Australia?

21 Pages Posted: 8 Jun 2007

See all articles by Tristan Boyd

Tristan Boyd

University of Western Australia - UWA Business School

Philip R. Brown

UWA Business School, M250; Financial Research Network (FIRN)

Alexander Szimayer

University of Hamburg - Faculty of Economics and Business Administration

Abstract

Employee stock options (ESOs) are a popular way of remunerating employees. We analyse factors at the firm and option level affecting the employee's decision to exercise ESOs before they mature. Exercises over the period 1998-2004 are analysed and the key factor influencing early exercise is found to be dividends. Exercises frequently occur well before maturity, but in most cases little time value is sacrificed. Our findings have implications for the 'fair' valuation of ESOs in companies' financial statements, as required by the relevant Australian accounting standard, AASB 2.

Suggested Citation

Boyd, Tristan and Brown, Philip R. and Szimayer, Alexander, What Determines Early Exercise of Employee Stock Options in Australia?. Accounting and Finance, Vol. 47, No. 2, pp. 165-185, June 2007. Available at SSRN: https://ssrn.com/abstract=991972 or http://dx.doi.org/10.1111/j.1467-629X.2007.00211.x

Tristan Boyd

University of Western Australia - UWA Business School

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Philip R. Brown

UWA Business School, M250 ( email )

Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Alexander Szimayer (Contact Author)

University of Hamburg - Faculty of Economics and Business Administration ( email )

Von-Melle-Park 5
Hamburg, 20146
Germany

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