Employee stock option compensation: a behavioral finance approach
Saved in:
| Main Author: | |
|---|---|
| Format: | Thesis Book |
| Language: | English |
| Published: |
Wiesbaden
Dt. Univ.-Verl.
2004
|
| Edition: | 1. Aufl. |
| Series: | Gabler Edition Wissenschaft
Management, Organisation und ökonomische Analyse ; 2 |
| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | XV, 253 S. graph. Darst. |
| ISBN: | 3824482134 |
Staff View
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Record in the Search Index
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| adam_text | IX
Tabel of contents
1. Introduction to the topic 1
1.1. Relevance of the topic 2
1.2. Questions posed 11
1.3. Summary conclusions 11
1.4. Outline of the structure of the book 13
2. Theoretical empirical assessment 15
2.1. Definition of a stock option plan 15
2.2. Review of stock option plan use 20
2.2.1. The principal/agent problem in the publicly traded firm 20
2.2.2. Appropriateness of stock options to reduce agency costs 26
2.2.3. Dynamic model of stock option plans 28
2.2.4. Impact on systemic risk premium 33
2.3. Empirical analysis of the use of stock option plans 37
2.3.1. Level of stock option compensation in the US and Europe 38
2.3.2. Impact on pay performance intensity 42
2.3.3. Impact on performance 46
2.3.4. Impact on corporate policies 50
2.4. Conclusion 52
3. Review of risk neutral valuation models 53
3.1. Importance of valuing stock options 53
3.2. Valuing stock options from the company perspective 56
3.2.1. Principle of risk neutral valuation 56
3.2.2. Outline of some risk neutral valuation models 58
3.2.3. Implication for estimating the cost of stock options to companies 65
3.3. Valuing stock options from the executive s perspective 67
3.3.1. Limitations of risk neutral valuation 67
3.3.2. Modified risk neutral models 69
3.4. Conclusion 76
X Tabel of contents
4. Utility based stock option valuation 79
4.1. General introduction to expected utility models 80
4.2. Hall Murphy model 84
4.2.1. Introduction 84
4.2.2. Executive Value lines 90
4.2.3. Critique of the Hall Murphy papers 97
4.3. Modifications to the traditional EU model 109
4.3.1. Violations of expected utility theory 109
4.3.2, Developments towards a non traditional theory of utility 119
4.4. Implications for a new model of subjective valuation 142
5. A new model to value executive stock option 145
5.1. Model specification and implementation 146
5.1.1. Fundemantal idea and specification 147
5.1.2. Model for the expected future movement of the underlying stock price ISO
5.1.3. Framing of outcomes 154
5.1.4. Estimating the value function 158
5.1.5. Estimating the decision weighting process 162
5.2. Model outputs 169
5.2.1. Exemplary data settings 171
5.2.2.Subjective Value Line of a stock option grant 174
5.2.3. Pay Performance Intensity 180
5.2.4. Pay Volatility Intensity 185
5.3. Summary of model findings and first hypotheses 190
6. Experimental test of subjective valuations 195
6.1. Purpose of the experiment 195
6.2. Experimental design 196
6.3. Experimental results 205
64. Implications for the valuation model 211
7. Conclusion and outlook 217
7.1. Summary conclusions 217
7.2. Future research agenda 221
Tabel of contents XI
Appendix I 223
Appendix I 229
Bibliography 231
XIII
Table of exhibits
Exhibit 1: Comparative use of stock option plans 5
Exhibit 2: Size of German stock option plans 5
Exhibit 3: Comparative growth in earnings 1991 1999 7
Exhibit 4: Example of CEO and shareholder value creation 8
Exhibit 5: High economic cost of stock option plans 9
Exhibit 6: The value gap 10
Exhibit 7: Structure of the book 13
Exhibit 8: Stock option plan parameters definition of terms 16
Exhibit 9: Option payout 17
Exhibit 10: Stock option plans by type of exercise price 18
Exhibit 11: Analysis of residual loss caused by outside ownership 24
Exhibit 12: Use of stock options to avoid residual loss 28
Exhibit 13: Comparative CEO pay 1999 40
Exhibit 14: Drivers of the growth in CEO pay 1991 1999 41
Exhibit 15: Share of long term incentives by position 42
Exhibit 16: Increase in US pay performance intensity 44
Exhibit 17: Drivers of pay performance intensity 45
Exhibit 18: Black Scholes formula for a call option 61
Exhibit 19: Binominal stock option model by Cox, Ross, Rubinstein 64
Exhibit 20: Executive Value Lines 91
XIV Table of exhibits
Exhibit 21: Slope of the executive value lines for a single stock option 94
Exhibit 22: PPI for Executive Values 95
Exhibit 23: Impact of risk aversion on executive valuation 99
Exhibit 24: Impact of higher risk aversion on executive PPI 100
Exhibit 25: Impact of less stochastic wealth on executive valuation 102
Exhibit 26: Impact of less stochastic wealth on executive PPI 102
Exhibit 27: Impact of higher volatility on executive valuation 104
Exhibit 28: Impact of higher volatility on executive PPI 104
Exhibit 29: Impact of shorter vesting periods on executive valuation 105
Exhibit 30: Impact of shorter vesting periods on executive PPI 106
Exhibit 31: Key elements of prospect theory 121
Exhibit 32: Value function/Decision weights in prospect theory 125
Exhibit 33: Decision weights according to rank dependent utility 131
Exhibit 34: Numerical example of rank dependent decision weighting 133
Exhibit 35: The fourfold pattern of risk aversion 135
Exhibit 36: Probability weighting function under CPT 137
Exhibit 37: Estimates of the parameters for CPT 138
Exhibit 38: Structure of the certainty equivalent model 147
Exhibit 39: Payouts/Probabilities at the model end nodes 152
Exhibit 40: Probability of payouts 152
Exhibit 41: Framing 157
Exhibit 42: Shape of the value function 161
Exhibit 43: Impact of decision weighting 168
Exhibit 44: Link of probability weighting to decision weights 169
Table of exhibits XV
Exhibit 45: Impact of non expected utility stock option valuation 170
Exhibit 46: Exemplary data settings 171
Exhibit 47: Subjective executive value with risk aversion only 175
Exhibit 48: Subjective value of total stock option grant (1/3) 177
Exhibit 49: Subjective value of total stock option grant (2/3) 178
Exhibit 50: Subjective value of total stock option grant (3/3) 179
Exhibit 51: Simplified PPI incentive model 181
Exhibit 52: Subjective pay performance intensity 182
Exhibit 53: PPI with risk aversion only 184
Exhibit 54: PVI with risk and loss aversion only 186
Exhibit 55: PVI with risk aversion only 188
Exhibit 56: Subjective PVI 189
Exhibit 57: Sample Matrix 199
Exhibit 58: Experimental sample matrix 201
Exhibit 59: Company profiles 203
Exhibit 60: Response analysis 206
Exhibit 61: Distribution of answers 207
Exhibit 62: Empirical average size of the certainty equivalents 208
Exhibit 63: Empirical results by group 209
Exhibit 64: Analysis of differences between empirical groups 210
Exhibit 65: Statistically different samples (BG/EC Cases) 211
Exhibit 66: Survey averages versus calibrated valuation model outputs 213
Exhibit 67: Decision weighting inherent in the calibrated model 214
|
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| author | Wolff, Florian Cornelis |
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| edition | 1. Aufl. |
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| indexdate | 2024-07-09T20:06:18Z |
| institution | BVB |
| isbn | 3824482134 |
| language | English |
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| physical | XV, 253 S. graph. Darst. |
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| spelling | Wolff, Florian Cornelis Verfasser aut Employee stock option compensation a behavioral finance approach Florian Cornelis Wolff 1. Aufl. Wiesbaden Dt. Univ.-Verl. 2004 XV, 253 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Gabler Edition Wissenschaft : Management, Organisation und ökonomische Analyse 2 Zugl.: Vallendar, Wiss. Hochsch. für Unternehmensführung, Diss., 2003 Aktienbewertung (DE-588)4000933-6 gnd rswk-swf Anlageverhalten (DE-588)4214003-1 gnd rswk-swf Aktienoptionsplan (DE-588)4571063-6 gnd rswk-swf (DE-588)4113937-9 Hochschulschrift gnd-content Aktienoptionsplan (DE-588)4571063-6 s Aktienbewertung (DE-588)4000933-6 s Anlageverhalten (DE-588)4214003-1 s DE-604 Gabler Edition Wissenschaft Management, Organisation und ökonomische Analyse ; 2 (DE-604)BV035419807 2 HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=013121204&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Wolff, Florian Cornelis Employee stock option compensation a behavioral finance approach Gabler Edition Wissenschaft Aktienbewertung (DE-588)4000933-6 gnd Anlageverhalten (DE-588)4214003-1 gnd Aktienoptionsplan (DE-588)4571063-6 gnd |
| subject_GND | (DE-588)4000933-6 (DE-588)4214003-1 (DE-588)4571063-6 (DE-588)4113937-9 |
| title | Employee stock option compensation a behavioral finance approach |
| title_auth | Employee stock option compensation a behavioral finance approach |
| title_exact_search | Employee stock option compensation a behavioral finance approach |
| title_full | Employee stock option compensation a behavioral finance approach Florian Cornelis Wolff |
| title_fullStr | Employee stock option compensation a behavioral finance approach Florian Cornelis Wolff |
| title_full_unstemmed | Employee stock option compensation a behavioral finance approach Florian Cornelis Wolff |
| title_short | Employee stock option compensation |
| title_sort | employee stock option compensation a behavioral finance approach |
| title_sub | a behavioral finance approach |
| topic | Aktienbewertung (DE-588)4000933-6 gnd Anlageverhalten (DE-588)4214003-1 gnd Aktienoptionsplan (DE-588)4571063-6 gnd |
| topic_facet | Aktienbewertung Anlageverhalten Aktienoptionsplan Hochschulschrift |
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