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Behavioral agency model (BAM) posits that executive risk preferences are influenced by losses to their current option wealth relative to gains from their prospective option wealth. Accordingly, current option wealth attenuates risk-taking while prospective option wealth amplifies risk-taking. In the context of corporate irresponsible behaviors, this study attempts to advance the BAM by theorizing how the presence of conditions that give rise to distributive and procedural injustice in CEO compensation can further amplify the positive effects of CEO prospective option wealth on risk-taking, thereby destroying stakeholder value. Our findings, based on a longitudinal cross-sectional sample of 8,669 firm-year observations for the period 2001 to 2018, support our theorization that CEO perceptions of unfairness in compensation amplify excessive risk-taking, thereby increasing the likelihood of corporate social irresponsibility. Our study has important implications for advancing the BAM and for the study and design of executive compensation. [ABSTRACT FROM AUTHOR]

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Studying 30 countries, we find that the link between employee satisfaction and stock returns is significantly increasing in a country's labor market flexibility. This result is consistent with employee satisfaction having greater recruitment, retention, and motivation benefits where firms face fewer hiring and firing constraints and employees have greater ability to respond to satisfaction. Labor market flexibility also increases the link between employee satisfaction and current valuation ratios, future profitability, and future earnings surprises, inconsistent with omitted risk factors and identifying channels through which employee satisfaction may affect stock returns. The findings have implications for the differential profitability of socially responsible investing strategies around the world—in particular, the importance of considering institutional factors when forming such strategies. This paper was accepted by Lin William Cong, finance. Funding: This work was supported by Deloitte Institute of Innovation and Entrepreneurship. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4889. [ABSTRACT FROM AUTHOR]

We first compare several measures of import penetration and find that total imports, tariffs, and exchange rates are endogenous, while imports from China are largely exogenous. Then we examine the effects of Chinese import penetration on executive compensation of U.S. firms. We document that Chinese import penetration reduces executives' stock grants and wealth-performance sensitivity, suggesting that competition mitigates agency problems and the need for conventional alignment mechanisms. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

This paper discloses the situation, specifics, tendencies, and limitations of employers' adjustment to employee financial participation (sharing shares) in companies in Lithuania. Three main tools are analyzed: the issuance of employee shares (known since 1990); a share granting (effective since 2018); and employee stock options. The empirical part of the paper is based on interviews conducted in 2019 and repeated in 2022–2023 with expert lawyers from Lithuanian law firms, alongside a survey of Lithuanian companies. The following aspects were analyzed: employers' knowledge of the possibilities of involving employees in company management (activities); instruments used by employers to implement employee financial participation; reasons that prevent successful employee involvement and barriers from the perspective of employees; tax-related issues; and measures that could facilitate greater employee involvement within the company. The research results show that there is a tendency that promotion via shares is becoming more popular and that business culture is slowly evolving. Employee stock options are the most used instrument, surpassing the use of statutory tools to grant shares to employees. [ABSTRACT FROM AUTHOR]

For stock and index options in the United States, OptionMetrics records prices at 3:59 p.m., not 4:00 p.m. as assumed in previous literature. The resulting 1‐min time discrepancy with closing share prices creates artificial variability in implied volatility spreads and strongly affects market‐wide spreads. It leads to particularly large distortions at the onset of the COVID‐19 pandemic. For index options in Europe, OptionMetrics data show large deviations from put‐call parity even though the original option prices match the parity exactly. Finally, the implied volatilities of stock options in Europe show clusters of exceptional deviations due to incorrect dividend information. [ABSTRACT FROM AUTHOR]

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Purpose: Employee Stock Options [ESOs] have been used widely as a component of employees' compensation. To maximise the incentive effect of these options it is very important to understand the exercise decision of the employees. This is an important financial decision that is dependent on both rational and psychological factors. This paper aims to study the mediating role of Herding Bias on Personality Traits and the employees' decision to exercise ESOs. Design/methodology/approach: The data were collected through a self-structured questionnaire from 210 employees of Banks and NBFCs [Non-Banking Financial Companies] who have received and exercised the ESOs. SPSS MACRO version 25 was used to understand the mediational effect of Herding Bias on Personality Traits and Employees' decision to exercise their ESOs. Findings: The results showed that Personality Traits affect the employees' decision to exercise their ESOs. The study also shows a partial negative mediating effect of Herding Bias on Personality Traits and employees' decision to exercise ESOs. Originality/value: Limited study has been conducted on how the employees make their decision to exercise ESOs. Although extant studies have touched upon the importance of including behavioural biases in ascertaining the exercise decision of the employees, the predictors of the behavioural biases have not been studied under this context. To the best of the author's knowledge, this study is the first in itself to study the inter-linkage between Personality Traits, Herding Bias and employees' decision to exercise ESOs. [ABSTRACT FROM AUTHOR]

This study investigates the effects of foreign return-oriented shareholders and domestic relational shareholders of Japanese companies on the earnings management behavior of their invested firms when stock option pay is adopted. We theorize that foreign shareholders seek short-term returns and do not engage in close monitoring due to an information disadvantage while domestic shareholders prevent managerial behavior that distorts information disclosure. Our findings show that managers of firms that use stock option pay engage in earnings management to increase their private financial benefits and meet capital markets' expectations, which allows them to enhance their own reputation. However, this managerial behavior is contingent on the firm's ownership structure. Our results show that while foreign shareholders enhance the positive impact of stock options on earning management, domestic shareholders and affiliated directors mitigate this positive effect. Our empirical analyses support the argument that ownership heterogeneity is a key determinant of managerial propensity to engage in earnings management when Japanese firms adopt stock option pay. [ABSTRACT FROM AUTHOR]

We study the mean–variance hedging of an American‐type contingent claim that is exercised at a random time in a Markovian setting. This problem is motivated by applications in the areas of employee stock option valuation, credit risk, or equity‐linked life insurance policies with an underlying risky asset value guarantee. Our analysis is based on dynamic programming and uses PDE techniques. In particular, we prove that the complete solution to the problem can be expressed in terms of the solution to a system of one quasi‐linear parabolic PDE and two linear parabolic PDEs. Using a suitable iterative scheme involving linear parabolic PDEs and Schauder's interior estimates for parabolic PDEs, we show that each of these PDEs has a classical C1, 2 solution. Using these results, we express the claim's mean–variance hedging value that we derive as its expected discounted payoff with respect to an equivalent martingale measure that does not coincide with the minimal martingale measure, which, in the context that we consider, identifies with the minimum entropy martingale measure as well as the variance‐optimal martingale measure. Furthermore, we present a numerical study that illustrates aspects of our theoretical results. [ABSTRACT FROM AUTHOR]

If the LANTERN results are confirmed in the ongoing pivotal studies (NCT05219968, NCT05295459), LYR-210 (7500 g) may be a promising treatment that could improve the QoL of CRS patients. Keywords: chronic rhinosinusitis; quality of life; SNOT-22; topical therapy for chronic rhinosinusitis EN chronic rhinosinusitis quality of life SNOT-22 topical therapy for chronic rhinosinusitis 1821 1824 4 08/25/23 20230901 NES 230901 INTRODUCTION Chronic rhinosinusitis (CRS) is a highly prevalent disorder with a decreased quality of life (QoL).[1] Persistent sinonasal symptoms, fatigue, sleep disruption, and depression negatively affect the well-being and productivity of CRS patients.[1] Intranasal corticosteroid sprays fail to adequately control symptoms in all CRS patients due to inconsistent delivery of effective corticosteroid doses deep into the sinuses, rapid mucosal clearance, and poor compliance.[[1], [3]] Limitations of current CRS therapies demonstrate the need for long-acting, local anti-inflammatory treatments that provide targeted therapy to the sinonasal mucosa and improve symptoms and QoL. The SNOT-22 subdomain results are consistent with the ~40-point improvement from baseline in the SNOT-22 total score for LYR-210 (7500 g).[4] LYR-210 (7500 g)-treated subjects on average reported >2× the MCIDs for the SNOT-22 subdomains[9] at week 24. [Extracted from the article]

This article studies how the three-way interaction among shareholders, creditors, and managers shapes firms' executive compensation. Firms with a higher ownership share by "dual holders"—institutional investors that simultaneously hold equity and bond of the company—adopt a less risk-inducing compensation structure: less stock options and more inside debt. Exploiting financial institution mergers that increase or decrease dual ownership for portfolio companies, we identify a causal link between dual ownership and CEO compensation policies. Mutual fund proxy voting data suggest that shareholder voting is an important channel for dual holders to implement less convex contracts. [ABSTRACT FROM AUTHOR]

We analyze how employee compensation contracts of target firms affect merger terms and outcomes. Using unique data from merger agreements, we document that in 80.0% of all merger and acquisition (M&A) deals, at least some of the target's employee stock options (ESOs) are canceled by the acquirer and not replaced by new equity-based grants. Contract modifications reduce the value of ESOs by 38.4% in the average M&A deal. Further, the combined merger returns are larger when employees experience greater losses. Overall, our results indicate that the benefits of reducing the number of ESOs outweigh the potential negative effects on firm value. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Scholars, regulators, and practitioners have long struggled with challenges emanating from the separation of ownership and control of modern corporations. Agency theory typically prescribes the use of stock options, or other outcome-based contractual arrangements, to overcome the critical issue of information asymmetry. We theorize that this arrangement, which leaves information asymmetry in place, provides CEOs an informational advantage that can be used, via impression management techniques, to circumvent some of the intended benefits of option grants. Specifically, we argue that the period leading up to an option grant creates a scenario where CEOs are incentivized to reduce the stock price of their firm for personal gain. Our results suggest that CEOs respond to this incentive by adjusting the tenor of releases from the firm during the pregrant period, providing CEOs a substantial economic gain. We also show that underpaid CEOs and CEOs with higher discretion pursue this activity more frequently. Our findings highlight a critical challenge of agency theory: if information asymmetry remains, a motivated CEO can often circumvent the contractual arrangements intended to mitigate that very problem. We offer future research paths and practical recommendations to address this issue. [ABSTRACT FROM AUTHOR]

Does option-based compensation affect payout policy? To address this question, we examine the adoption of mandatory expensing of stock options. Our identification strategy exploits the fact that the reduction in option-based compensation after the accounting change varies with the firm-specific expected accounting impact. Across a battery of tests, we do not find that (accounting-driven) reductions in option-based pay cause dividends to increase or repurchases to decrease. Our results contrast with the widely held belief that option-based pay has a significant causal influence on payout policy and cast doubts on its role in the shift from dividends to repurchases. [ABSTRACT FROM AUTHOR]

The authors assert that broad-based stock options create a social exchange relationship between the employer and employees, leading to higher individual job performance in the next period. They compare this social exchange hypothesis to the more typical incentive-based explanation for stock options, which is that holding options generates financial incentives for better individual job performance in the current period. Findings show that significant and meaningful relationships are associated with social exchange effects and that these are both independent of incentive effects and arguably greater than those for the incentive effects. The authors use non-parametric and parametric fixed effects models, other controls for sample heterogeneity, and alternative specifications to address possible concerns about identification and endogeneity. These results extend empirical studies of social exchange relationships to common workplace practices. They also raise the possibility that some of the performance effects attributed to incentives in other studies may actually be attributable to social exchange effects. [ABSTRACT FROM AUTHOR]

We investigate whether Confucian culture affects the adoption of employee stock ownership plans (ESOPs). Using data from a sample of Chinese A-share listed firms between 2014 and 2020, we find that Confucianism promotes firms to adopt ESOPs. This effect is concentrated in firms with high human capital intensity, intense industry competition, and less foreign culture influence. Further analysis reveals that stronger Confucian influence leads to longer lock-up periods, more employees holding, larger actual fund size, and more shares per employee for ESOPs. Finally, we suggest that by trigging ESOPs, Confucianism enhances firm value. This study highlights the importance of culture for employee incentives and extends our understanding of ESOP determinants. [ABSTRACT FROM AUTHOR]

The article provides information on three interconnected topics: corporate finance, corporate governance, and corporate social responsibility (CSR). It highlights the role of corporate finance in managing cash flow, raising capital, and making investments. The article discusses the importance of corporate governance in ensuring ethical practices and preventing agency problems between shareholders and management.

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Motivated by the institutional setting and based on the extant literature, this paper investigates the effects of changes in the regulation of employee stock options (SO) and political connection (PC) on SO grants (size-SOP and value-SOM) and the moderating effects of changes in ESO regulations on the relationship between political connections and SO grants. Using the established measurements of stock option grants, political connection and stock option regulation change (REG), we analysed the final sample of 482 firm-year observations from 190 firms firm-year from 2006 to 2018, which obtained from Chinese listed firms. Empirical analysis by using pooled ordinary least squares(OLS) and Fixed Effect (EF) regression model with robust standard error used for analyzing the data. To mitigate the self-selection biases, we use the propensity score matching (PSM) method. To address the endogeneity (i.e. causality and/or simultaneity) issue as well as for the robustness test, we use 2SLS regression analysis with instrumental variables to check the validity of a moderating effect regulation change and PC on the relationship between PC and SOs granted (SOP and SOM). We find that the implement of SO regulations change has a negative effect on SO grants in terms of both size and value, while PC has a positive effect on SO grants. Change in the ESO regulations has negatively moderated the relationship between PC and ESO grants. This evidence suggests that PC lead to increase SO grants before the change in SO regulations but a tightening of ESO regulations inversely moderated that relationship and lead to a reduction in SO grants after 2009. PC firms granted significantly more and worthier stock options to their employees than unconnected firms, but that trend was attenuated after the reform.According results, this research provides crucial info to managers, market regulators and investors to be able to enrich effective stock option regulation process along with impact of PC on stock option in China. Our findings also have important insights for investors and firms, and policy implications for policy-makers and regulators. [ABSTRACT FROM AUTHOR]

The riskiness developed by Aumann and Serrano (J Polit Econ 116:810–836, 2008) is a measure based on mean, standard deviation and higher order moments. Instead of relying on corporate policies as indirect measures of firm risk, we theoretically show a positive relation between the value of compensation contracts with convex payoff and the firm's option implied riskiness through second-order stochastic dominance and provide supportive empirical evidence of this risk taking incentive. To address the endogeneity concern, we perform a difference-in-difference analysis using the implementation of FAS 123R in 2006, an accounting standard under which firms are required to recognize the fair value-based expense of stock option grants. Firms thereby are discouraged from granting executive stock options (ESO) because of the higher cost resulted from the strict expense recognition required by FAS 123R. Hence, the implementation of FAS 123R results in an exogenous negative shock to the use of ESO. Using this approach, we find a significant decrease in the option implied riskiness subsequent to FAS 123R, supportive of the risk-taking incentive associated with executive stock options. [ABSTRACT FROM AUTHOR]

This paper aims to understand how firms' asymmetric risk environment affects the CEO compensation structure. I investigate how firm's downside risk and upside potential differentially affect the choice between cash and equity compensation and the choice between stock options and restricted stock compensation. First, I show that, as downside risk (upside potential) increases, boards grant more cash compensation (more equity compensation) and less equity compensation (less cash compensation). Second, I show that the proportion of CEO option compensation in total equity compensation increases with downside risk and decreases with upside potential. My findings support the idea that boards respond to changes in their firms' risk environments by adjusting the structure of CEO compensation to reflect riskaverse CEOs' risk preferences. [ABSTRACT FROM AUTHOR]

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The article details the story of how Omniprobe's Focused Ion Beam (FIB) lift-out solution came to market. Two teams, from Texas Instruments and Bell Labs, were working on the technique at the same time, with one focusing on in situ lift-out (INLO) and the other on ex situ lift-out (EXLO); and Omniprobe's INLO system was developed due to the limitations of the H-bar method for TEM sample preparation.

Copyright of Journal of Technology Economics is the property of Chinese Society of Technology Economics and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This study explores how bonding contracts improve employee attraction and retention. These bonds are payment schemes tied to employment duration, such as the vesting of pensions and stock options. This study presents an employee turnover model in which only the worker knows their taste for their current job. This taste gives the current employer monopsonistic power, resulting in deadweight loss from excessive turnover. Bonding contracts serve as a commitment device for future wages and eliminate such deadweight loss, but only when the roles of bondholders and wage setters are separate. Firms that do this are more competitive to new hires. This model offers several empirical findings regarding a variety of common bonding practices. [ABSTRACT FROM AUTHOR]

This study investigates whether SFAS 123R was effective at curtailing firms' earnings management associated with stock option compensation. Using a difference‐in‐differences (DiD) analysis, I find that firms with high implied option compensation before SFAS 123R significantly reduced earnings management after SFAS 123R. The sub‐period analysis indicates that option compensation after SFAS 123R is negatively related to earnings management, while option compensation before SFAS 123R is positively related to earnings management. Overall, the findings indicate that SFAS 123R effectively diminished earnings management associated with stock option compensation. [ABSTRACT FROM AUTHOR]

Copyright of Taiwan Financial & Economic Law Review is the property of Charitable Trust Fund for Taiwan Finance, Enterprise & Banking Law and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

On July 27, 2020, in Allen v. Wells Fargo & Co., the U.S. Court of Appeals for the Eighth Circuit held that plaintiffs who bring an imprudence claim under the Employment Retirement Income Security Act against a fiduciary of an employee stock ownership plan (ESOP) alleging that the fiduciary failed to act on negative inside information do not meet their pleading burden. In doing so, the Eighth Circuit agreed with three other federal circuit courts that an imprudence claim predicated on an ESOP fiduciary's failure to disclose negative information is insufficient to survive a motion to dismiss. Only the Second Circuit has held that plaintiffs can survive a motion to dismiss when offering early disclosure as a possible alternative action the fiduciary could have taken. This Comment argues that the Eighth Circuit's holding is correct because it best protects ESOP plan managers and takes account of ESOP's unique structure. [ABSTRACT FROM AUTHOR]

While ordinary options are wholly exercised at a chosen time to maximize holders' benefits, empirical evidence favors the intertemporal exercise of corporate securities such as convertible bonds and executive/employee stock options. This is because the exercises of these securities can dilute the issuers' equity, inject capital into the issuers' assets, and change the capital structures, which influences the exercise payoffs and the remaining security values. However, the literature simplifies these impacts on exercise policies, leading to biased and even irrational pricing results. We address this via a state-transition forest that partitions the securities into k units and the time span of the forest into n steps. A representative holder can exercise an integral multiple of units at different steps to maximize her benefit, given that the lump sum of the exercise units does not exceed k. It can be further extended to model intertemporal exercises conducted by competitive investors who hold too-small amounts of securities to influence prices. The forest is then composed of k + 1 trees to capture transitions among capital structures due to different lump sums of option exercise units. The intertemporal exercise decision at each forest node is optimally determined by recursively solving the Bellman equation. This carefully designed forest structure reduces the running time complexity from O (n 2 k) to O (k 2 n 2). We show that ignoring or simplifying intertemporal exercises and corresponding dilutions/injections significantly influences pricing results. [ABSTRACT FROM AUTHOR]

Stakeholder capitalism seeks to benefit multiple stakeholders, rather than primarily shareholders. Two increasingly popular forms are the employee stock ownership plan (ESOP) and the benefit corporation. But what happens when a company combines these structures? While the benefit corporation’s expanded stakeholder mandate may appear to come at the expense of employee-owner wealth and the potential for shared power, in fact they can complement one another. Being a benefit corporation can strengthen the employee-owned company’s ownership culture through enhanced engagement and creation of a meaningful work environment. And in turn, employee owners can add a layer of accountability to help them meet the benefit corporation’s expanded stakeholder mandate. [ABSTRACT FROM AUTHOR]