Abstract
Employee Stock Bonus (ESB) is a unique bonus model to link employee salary package with company performance under the current regulation in Taiwan. Comparing with Employee Stock Option (ESOP) in USA, ESB is different in accounting process, company¡¦s actual cost and the model of employee gain in spite of the principle of linking employee salary package to corporate performance is the same. Moreover, the incentive effectiveness and the impact on shareholders¡¦ value between ESB and ESOP need to be clarified.
The objectives of this research are to discuss the pros and cons of ESB program as well as to analyze the implementation history and decision characterization of ESB in Taiwan. In the first part of this study, we compare the difference between ESB and ESOP in terms of their fundamentals, implementation and incentive effectiveness, as well as analyze the impact on shareholders¡¦ value by various accounting principles and valuation models approaches.¡@In the second part, we do a history study on ESB implementation history of Taiwan hi-tech industries. We point out some improper ESB decisions that hurt shareholder¡¦s value. We also propose some indexes to measure effectiveness, efficiency of ESB and degree of impact on shareholder¡¦s value. In the third part, we apply regression methodology and cross-sectional analysis to characterize the ESB decision using the samples from Taiwan listed hi-tech companies between 1998 to 2001.
We conclude the following contributions in this research:
1. The fundamental of ESB is to provide employee bonus by diluting shareholder¡¦s value. During bull market or stock price appreciates after stock splits, ESB perfectly incorporates employee bonus with shareholders¡¦ value. On the other hand, ESB becomes an extra overhead for shareholders during bear market or stock price depreciates after stock splits.
2. What employees gain from ESB is paid by equity market instead of being paid by the company, no matter whichever accounting principle is adopted. Recognizing ESB as company expense will present income statement in more a proper way but will not impact book value of equity.
3. To recognize ESB as company expense will reduce ¡§intrinsic value of equity¡¨ evaluated by EBO model as EBO model is based on accounting profit. As DFC model is based on free cash flow, ¡§intrinsic value of equity¡¨ evaluated by DFC model will not change even if different accounting principles are adopted. However, ¡§intrinsic value of equity per share¡¨ will be slightly affected by the dilution of share number.
4. In the research samples, mean of ¡§the market value of ESB over average appreciation value of company¡¨ is 13%¡Astandard deviation is 53%¡Amedian is 8%, which implies the welfare effectiveness created by ESB to shareholders varies with individual company.
5. The result of empirical study supports that the main measurement index for managers to decide the share number of ESB program is ¡§total market value of ESB¡¨ instead of ¡§profit share rate¡¨ or ¡§dilution rate¡¨, regardless companies which adopted ¡§fix profit share rate for ESB¡¨ policy.
6. According to the result of empirical study, ¡§the market value of ESB ¡¨ is significantly positive- correlated to growth opportunity, merit raises rate, net profit growth rate, and significantly negative ¡V correlated to company size and financial leverage. ¡§The market value of ESB per employee¡¨ is significantly positive-correlated to company size, growth opportunity, merit raises rate, net profit growth rate, and significantly negative ¡V correlated to financial leverage. The result is consistent with hypotheses that are based on Agency Theory, Information Asymmetry Theory and Scale of Economic. The result of empirical study is not able to support the hypotheses that managers will offer employee more value of ESB according to the appreciation of company value.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0827103-154033 |
| Date | 27 August 2003 |
| Creators | Lo, Yu-Jen |
| Contributors | Jen-Jsung Huang, Kuang-Erh Lai, Hsioujen Kuo |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0827103-154033 |
| Rights | not_available, Copyright information available at source archive |
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