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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26801
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| Title: | Employee Stock Options (ESOPs) and Restricted Stock: Valuation Effects
and Consequences |
| Authors: | Damodaran, Aswath |
| Issue Date: | Sep-2005 |
| Series/Report no.: | S-DRP-05-03 |
| Abstract: | In the last decade, firms have increasingly turned to offering employees
options and restricted stock (often with restrictions on trading) as
part of compensation packages. Some of this trend can be attributed to
the entry of young, cash poor technology firms into the market, many of
which have to use equity because they have no choice. However, many
larger market cap firms that can afford to pay cash compensation have
used stock based compensation as a way of aligning managerial interests
with stockholder interests. In this paper, we begin by looking at
motives, good and bad, for using equity based compensation, and trends
over the last few years. We then turn to the accounting rules, old and
new, that govern how equity compensation is recorded and reported.
Finally, we consider how best to incorporate employee options and
restricted stock – both past and prospective – into
discounted cash flow and relative valuation models. |
| URI: | http://hdl.handle.net/2451/26801 |
| Appears in Collections: | Derivatives Research
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