The value and incentive effects of nontraditional executive stock option plans

abstract

• We examine the value and incentive effects of six nontraditional executive stock options: premium options, performance-vested options, repriceable options, purchased options, reload options, and indexed options. With reasonable parameter values, four options have lower value than a traditional option when granted, and large differences in value are evident across the types. Holding option value constant, five options create stronger incentives than traditional options to increase stock price, five create stronger incentives to increase risk, and three create stronger incentives to reduce dividend yield. Changing various option-specific parameters can produce large changes in incentive strengths. 2000 Elsevier Science B.V.

authors

• Johnson, Shane

published proceedings

• JOURNAL OF FINANCIAL ECONOMICS

author list (cited authors)

• Johnson, S. A., & Tian, Y. S.

citation count

• 173

complete list of authors

• Johnson, SA||Tian, YS

publication date

• July 2000

publisher

• Elsevier  Publisher

published in

• Journal of Financial Economics  Journal

keywords

• Executive Compensation
• Executive Stock Options
• Incentives
• Option Valuation

Digital Object Identifier (DOI)

• 10.1016/S0304-405X(00)00049-0

start page

• 3

end page

• 34

volume

• 57

issue

• 1

URL

• http%3A%2F%2Fdx.doi.org%2F10.1016%2Fs0304-405x%2800%2900049-0