Thesis (M.B.A.)--University of Hong Kong, 1996. / Includes bibliographical references (leaf 47-49).

Thesis (M.M.S)--Carleton University, 1992. / Also available in electronic format on the Internet.

Typescript. Includes vita and abstract. Includes bibliographical references (leaves 66-69). Also available online in Scholars' Bank; and in ProQuest, free to University of Oregon users.

abstract: This dissertation analyzes the reliability of reported employee stock option (ESO) expense, the determination of expected life of ESOs, motivations to manipulate ESO expense, and the impact of noise in ESO expense on subsequent stock price returns. Based on unique data, this is the first paper to measure average historical ESO life for all employees of a broad set of firms. I find average life has a mean of 4.12 years. Average life is reduced by 0.38 years per 10 percentage point increase in volatility, and industry effects explain an additional 7% of the variation. Reported expected life increases 0.37 years per year of historical life and an additional 0.16 years per year of age of the outstanding options. Deviations of reported volatility and life from benchmarks have positive correlations with deviations from own reporting history. Using stated assumptions rather than benchmark assumptions drops (increases) ESO expense by 8.3% (17.6%) for the 25th (75th) percentile firm. The change in earnings per share decreases (increases) by $0.019 ($0.007) for the 25th (75th) percentile firm. Tests for motivations to manipulate stock option expense downward have mixed results. Absolute values of deviations from benchmarks have a positive relationship with subsequent stock price volatility suggesting noise in reported stock option expense results in stock price noise. Deviations from benchmarks and subsequent cumulative abnormal returns have statistically significant results but are difficult to interpret. / Dissertation/Thesis / Ph.D. Business Administration 2011

There are three distinct avenues of empirical research relating to option returns. (1) attempts to explain option returns; (2) analysis of models forecasting option implied volatility (IV) versus alternative forecasts of futures realized volatility (RV); and (3) estimation of the economic benefit of volatility forecasting. This study shows that the three apparently disparate fields of research are closely related since option returns are positively related to volatility spread, and asset returns are negatively related to volatility shock. We show that IV outperforms, and indeed subsumes, a subset of time-series historical volatility (TS-HV) forecasts in predicting RV, although the finding that TS-HV does not provide incremental information in forecasting RV, the use of the alternative predictor can enhance the economic profit to option traders. The study also shows that option horizons significantly affect the impact of option mispricing and market direction on option returns. We provide incremental evidence that puts are more expensive than calls and reinforce the argument that pricing asymmetry can be attributed to the greater skewness of put returns due to a negative return-volatility relationship.

M.A. (Industrial Relations) / Please refer to full text to view abstract

TESIS PARA OPTAR AL GRADO DE MAGÍSTER EN TRIBUTACIÓN / Pablo Silva Moreno [Parte I], David Araya Quintana [Parte II] / La relevancia que han ganado en nuestro sistema los planes de compensación consistentes en la entrega de opciones de compra de acciones a trabajadores, denominados stock options, ha motivado el reconocimiento y regulación jurídicos de los efectos tributarios de esta figura, particularmente en la Ley sobre Impuesto a la Renta1, respecto de los beneficios que dichos planes reporten a sus destinatarios. Sin embargo, las razones que fundamentan la nueva regulación, no se han explicitado ni en el Mensaje Presidencial ni en la discusión parlamentaria en la tramitación del Proyecto que derivó en la dictación de la Ley 20.780. Probablemente obedezca a casos recientes de abuso de la figura en nuestro país2, o a una necesidad de actualización normativa a este respecto, teniendo en consideración las recomendaciones OCDE en cuanto a su tratamiento impositivo3, así como los estudios del impacto de la figura en su aplicación y entendimiento en el Modelo de Convenio para Evitar la Doble Tributación4 y en relación a materias propias de precios de transferencia5. Nacidos al alero de los contratos de opciones, la figura ha adquirido fisonomía propia, entendida ya no como un mero instrumento financiero, sino como un mecanismo de retribución laboral complejo, con implicancias en distintas disciplinas. En nuestro ordenamiento jurídico, la regulación ha sido escasa e inorgánica, y en cuanto a sus efectos tributarios, con anterioridad a la modificación introducida por la Ley 20.780, sobre Reforma Tributaria, éstos habían sido esbozados a punta de pronunciamientos emitidos por el Servicio de Impuestos Internos.

This dissertation analyzes the effect of a stock market downturn on executive compensation plans which include stock option contracts. A model is developed to determine sufficient conditions for which the optimal compensation contract exhibits characteristics of a fixed salary plus stock option. If a publicly known shift in the distribution of firm value occurs after contracting and before the agent takes his action, then it can be shown to be in the principal's interest to renegotiate the agent's contract. The resulting contract is again a fixed salary plus stock options with lower exercise prices than in the original contract. It is assumed that the shift in the distribution of firm value is a low probability event that is not contracted upon. To determine whether or not it is optimal to contract on a low probability event the set of original contract and rengotiated contract is compared to a contract that is complete with respect to the event. Benefits to complete contracting exist if the agent commits to stay after information about the event becomes available. However, if the agent can leave at any time, the principal may prefer, initially, not to contract on low probability events and simply renegotiate the contract if a low probability event occurs. Renegotiation can take the form of lowering the exercise price of outstanding stock options or adding a layer of options with a lower exercise price than existing outstanding options. Nonparametric tests on stock option grants in 1985 through 1988 indicate that the size of grants in 1987 and 1988 is significantly larger than in 1985 and 1986. These results support the prediction that stock options outstanding in 1987 were renegotiated following the stock crash in October 1987. / Business, Sauder School of / Accounting, Division of / Graduate

The objective of this research is to test the expensing of stock options as part of CEO compensation to earnings quality. Agency theory posits a conflict between the CEO's own self-interest and that of the owners who seek to maximize the long term value of their investment. To avoid this conflict compensation should align and bond these parties. Data was retrieved from Compustat, ExecuComp and Corporate Governance databases spanning the years of 2000 through 2009. The Dechow and Dichev (2002) earnings quality model using the change in working capital and error terms taken as the residuals was utilized. All hypotheses used earnings quality as a proxy for management choices and as the predictive power of accruals. The first hypothesis indicated granting of CEO stock options has a positive association to earnings quality. The second hypothesis tests the implementation of SFAS 123 (R) by expensing stock options and the association to earnings quality. The third and final hypothesis utilized the number of BOD members as to compare the association between expensing stock options as part of CEO compensation and earnings quality. Empirical support for all three hypotheses was found and consistent with expectations established by other research using earnings quality methodologies. Both the granting and expensing of stock options as part of CEO compensation has an association to earnings quality. There exists a stronger association between expensing stock options and earnings quality when firms have a larger number of BOD members. Support for agency theory was discovered because all three hypotheses were supported. This study was limited to U.S. firms that were publicly traded on major U.S. exchanges and only CEO compensation. Other executive compensation was not included. These limitations provide opportunities for future research. Knowledge was gained by exploring the earnings quality measures for evidence of bonding and alignment theory. This study extends the research in earnings quality by examining the relationship of granting and expensing of stock options as per SFAS 123 (R). It also contributes to the work in SFAS 123 (R) by testing four years before and after 2005, when implementation occurred.

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