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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27145
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| Title: | Companies' Modest Claims About the Value of CEO Stock Option Awards |
| Authors: | Yermack, David |
| Keywords: | Executive stock options
Disclosure
Valuation |
| Issue Date: | Dec-1995 |
| Series/Report no.: | FIN-95-034 |
| Abstract: | This paper analyzes company disclosures of CEO stock option values in
compliance with the SEC’s regulations for reporting executive
compensation data to stockholders. Companies appear to exploit the
flexibility of the regulations to reduce the apparent value of
managerial compensation. Companies shorten the expected lives of stock
options and unilaterally apply discounts to the Black-Scholes formula.
Theoretical support for these adjustments is often thin, and companies
universally ignore reasons that the Black-Scholes formula might
underestimate the value of executive stock options. The findings not
only cast light upon how corporations value executive stock options, but
also provide a means of forecasting compliance with controversial new
FASB requirements for firms to disclose the compensation expense
represented by executive stock options. |
| URI: | http://hdl.handle.net/2451/27145 |
| Appears in Collections: | Finance Working Papers
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