Causes and effects of employee stock option plans: Evidence from Singapore

This study highlights the determinants for the adoption of employee stock option plans (ESOPs) in Singapore and measures the impact of ESOP announcements on the shareholder wealth of adopting companies. We find that ESOP value is positively associated with a firm's growth opportunities but negatively related to interest coverage. Although larger firms are more likely to adopt ESOPs relative to smaller ones, among those that use ESOPs, the larger firms tend to use less ESOPs than the smaller ones. A further investigation of the market response to the adoption of ESOPs shows that the stock price reacts positively to such announcements, suggesting that investors view ESOPs favorably. The evidence demonstrates that ESOPs tend to align managerial with shareholder interests and contribute to the improvement of company performance.     

Do ESOPs enhance firm performance? Evidence from China’s reform experiment

China introduced employee stock ownership plans (ESOPs) in 1992 purely as an employee incentive scheme. The government initiated the policy experiment on ESOPs as part of China’s reform of its state-owned enterprises, and it was abruptly terminated 2 years after initiation. This policy experiment resulted in an exogenous sample of ESOPs that allows us to provide the first evidence from Chinese firms on the performance-ESOP relation. After examining a variety of performance measures, including ROA, ROE, Tobin’s q, and productivity, we find little difference in performance between ESOP firms and non-ESOP firms.     

Employee stock option plans and stock market reaction: evidence from Finland

This paper examines whether the adoption of stock option plans results in changes in shareholders’ wealth, and whether the stock market reactions to ESOP announcements could be explained by the target group of ESOP and the dilution effect. Short-horizon test methods are applied for this purpose. The sample consists of ESOP announcements of Finnish publicly quoted companies on the Helsinki Stock Exchange during the time period 1988–1998. The event study results show a slightly positive market reaction to announcements of ESOPs targeted to management and a negative market reaction in the case of ESOPs targeted to all employees. The results of regression analysis show that the ESOPs with limited dilution convey positive information to the stock market and the dilution effect has a negative impact on stock returns, especially in the case of ESOPs targeted to all employees.     

The Role of ESOPs in Takeover Contests

This article examines both the shareholder wealth effects of employee stock ownership plans (ESOPs) announced by firms subject to takeover pressure and the takeover incidence of targets with and without ESOPs. Although we do not find that defensive ESOPs significantly reduce shareholder wealth on average, we identify two factors—the change in managerial and employee ownership due to the ESOP and the simultaneous announcement of other defensive tactics—that are associated with negative stock price reactions. We find that ESOPs are strong deterrents to takeover. ESOP targets that are acquired earn higher returns than targets without ESOPs, but the difference is not statistically significant.     

员工薪酬竞争力与上市公司员工持股

基于员工持股相关理论,本文考察了员工薪酬竞争力对我国上市公司是否实施员工持股的可能影响。实证结果显示,员工薪酬竞争力越弱,企业越可能实施员工持股;且员工薪酬竞争力越弱,员工持股的锁定期限越长、覆盖人数越多以及员工股比例越高。进一步研究发现,员工薪酬竞争力与实施员工持股可能性的负相关关系,只在外部劳动力市场流动性高和内部人力资源成本较高以及融资约束较为严重的样本中显著。上述研究发现表明,上市公司的员工持股在一定程度上是企业在面临外部劳动力市场流动性压力和内部较高人力资源成本以及融资约束时,缓解员工薪酬竞争力不足的现实途径。本文的研究结论为完善上市公司员工持股制度提供了经验证据支持,同时拓展了员工持股、职工薪酬及收入分配等领域的相关研究文献。     

控股股东股权质押与员工持股计划“工具化”——基于A股上市公司的实证研究

自2014年《关于上市公司实施员工持股计划试点的指导意见》颁布以来,受到资本市场的广泛关注和支持,实施员工持股计划的公司逐渐增加。与此同时,控股股东股权质押可能引起的控制权转移风险也成为需要重点关注的问题。那么,有质押的控股股东是否会策略性地利用员工持股计划来缓解风险？本文利用2013—2018年A股上市公司的样本,考察控股股东质押对员工持股计划的影响。研究发现:前期控股股东有股权质押、质押率越高的公司随后推行员工持股计划的可能性越大,该效应随着控制权转移风险的提高而增大;控股股东股权质押的员工持股计划进行短期市值管理是有效的,但并未显著提升公司长期价值,提示控股股东存在借其进行内部人利益绑定和市值管理的动机;进一步研究表明,公司内部治理机制对控股股东股权质押下推行员工持股计划的效果有限。     

Cross-Listing and Operating Performance: Evidence from Exchange-Listed American Depositary Receipts

Abstract:  In this paper we examine the operating performance of non-US firms that enter major US stock exchanges using American Depositary Receipt (ADR) programs. Our dataset consists of 108 capital-raising and non-capital-raising firms from twenty four countries, cross-listed on major US stock exchanges during the period 1994–2004. We provide evidence that capital-raising cross-listed firms experience improvements in their operating performance after the listing, relative to a non-cross-listed matched sample of firms and relative to the pre-listing period, whereas non-capital-raising cross-listed firms out-perform a non-cross-listed matched sample of firms for both the pre-listing and the post-listing periods. These results suggest that the type of ADR program conveys information about changes in the post-listing operating performance. Moreover, both capital-raising and non-capital-raising cross-listed firms have positive abnormal returns due to the cross-listing and these abnormal returns are positively related with the post-listing abnormal changes in operating performance, suggesting that the market anticipates the post-listing abnormal changes in operating performance. Results are robust after adjusting for various firm and country risk characteristics.     

THE ECONOMIC CONSEQUENCES OF ESOPS

The purpose of this paper is to assess the economic consequences of Employee Stock Ownership Plans (ESOPs) by developing a general analytical model. The model is used to compare ESOPs with attempts to replicate the effects of ESOPs via alternative arrangements. The general conclusion of the paper is that in the absence of improved employee motivation, ESOP implementation has no particular economic consequence. However, an important exception to this finding may be the inexpensive access to the equity markets for the smaller, non-public firm provided by the ESOP.     

Learning,foreign operations and operating performance

We study the effect of a firm's internationalization on operating performance using data on publicly listed non-financial firms in Japan during 1990–2019. The proportion of international firms in the sample has been around 30–40% during the sample period. We show that internationalization is not associated with operating performance. Our evidence shows that international firms do not perform better or worse than matched domestic firms with similar firm characteristics. We also find that the relation between international experience and operating performance is U-shaped. These results have wide-ranging implications for international investment strategies.     

The information content of stock splits

This study examines whether stock splits contain information content about future operating performance or whether splits are undertaken by firms to realign their share prices and to improve trading liquidity. In the four years following split announcements, splitting firms do not experience improved operating performance relative to non-splitting firms. Furthermore, stock split signals are not related to future profitability. The positive announcement effect can be explained by lower share prices and improved market liquidity following stock splits but not by split signals and post-split operating performance. Our results show very little evidence that stock splits signal improvement in long-run operating performance and are more consistent with the trading range/liquidity hypothesis.     

Operating Performance and Stock Returns of Firms Calling Convertible Preferred Stocks

Abstract:   Using methodologies developed by Barber and Lyon (1996 and 1997 ), we examine the long‐run operating performance and stock returns of firms around in‐the‐money calls of convertible preferred stock. Our study intends to be a direct test of the hypothesis that managers call in‐the‐money convertibles when they view a decline in the firms' performance. We find no evidence that calling firms underperform non‐calling benchmark firms. On the contrary, we find mild evidence that the post‐call operating performance of calling firms is better than a carefully selected group of benchmark firms and call firms' post‐call stock returns are no worse than benchmark firms.     

Legal Institutions,Ownership Concentration,and Stock Repurchases Around the World: Signal Mimicking?

One of the central puzzles of signaling theory is how to assess signal quality, in particular the potential for signal mimicking. Our study provides evidence of signal mimicking in the context of stock repurchases. Employing an ex-ante proxy for the likelihood of mimicking stock repurchases and data on open market stock repurchases from 30 countries, we find that long-term operating and market performance following stock repurchases improve less for suspected mimicking firms. This finding contradicts the conventional characterization that managers use stock repurchases to signal undervaluation and enhanced future performance. We find that mimicking firms have smaller capital investments, need greater external financing, buy back fewer shares, and issue more new shares (and/or resell more treasury shares) in the year of the repurchase. Our analysis further shows that mimicking is more likely in countries with weak investor protections and in firms with higher ownership concentration. Further, mimicking associated with concentrated ownership is mitigated in countries with stronger investor protections and by the adoption of International Financial Reporting Standards (IFRS). Altogether, our findings provide evidence of signal mimicking in stock repurchases in international data that is influenced by market, ownership, legal, and financial reporting characteristics of countries.     

Underperformance of founder-led firms: An examination of compensation contracting theories during the executive stock options backdating scandal

Using the executive stock option (ESO) backdating scandal as a backdrop, this paper examines whether compensation committees can effectively set executive compensation contracts in the presence of a founding CEO. Analyzing a sample of firms accused of backdating ESO grant dates and a control sample of non-backdating firms, we find evidence suggesting that managerial power influences the decision to backdate. Specifically, our analysis indicates the presence of a founder CEO increases the likelihood that ESOs are backdated by 22%. We further find that founder-led firms strongly underperform a matched sample of non-backdating firms. This finding contrasts a number of studies that document superior operating and stock return performance for founder-led firms.     

An Examination of Long-Term Abnormal Stock Returns and Operating Performance Following R&D Increases

We examine a sample of 8,313 cases, between 1951 and 2001, where firms unexpectedly increase their research and development (R&D) expenditures by a significant amount. We find consistent evidence of a misreaction, as manifested in the significantly positive abnormal stock returns that our sample firms' shareholders experience following these increases. We also find consistent evidence that our sample firms experience significantly positive long‐term abnormal operating performance following their R&D increases. Our findings suggest that R&D increases are beneficial investments, and that the market is slow to recognize the extent of this benefit (consistent with investor underreaction).     

Resilience of Environmental and Social Stocks under Stress: Lessons from the COVID-19 Pandemic

This paper examines whether environmental and social (ES) activities affect the resiliency of firms during the COVID-19 crisis. We study a sample of 330 firms operating in five developed countries: Canada, France, Japan, the UK and the US. Our analysis shows that US firms with a high ES ranking experienced a significantly lower stock price range volatility during the Covid stock market rundown of February-March 2020. Such findings also hold for Japanese firms but only later on after the introduction of government support. In terms of returns, compared to their peers with a low ES ranking, Japanese and UK stock prices with a high ES ranking suffered more during and after the market rundown. For other countries, we do not find significant differences in stock price behavior based on ES ratings. Our findings suggest that engaging with ES activities is not associated with a better or worse performance during crisis times, which has important implications for investors and managers.     

Do investors overreact to earnings warnings?

This study shows that contrary to what many managers argue, there is no overreaction to earnings warnings. Our sample consists of 986 firms that had significantly lower fourth-quarter earnings than analysts' forecasts during the period of 1983 to 1998. About 9% of these firms released quantitative earnings information while 6.5% of the firms disclosed qualitative earnings information prior to the formal earnings report dates. We find that although these firms experience significant stock price declines during the warning period, their share prices are still higher than the economic values, calculated using Ohlson's residual income model. Further, long-run operating and stock performance of these firms are not more positive than the performance of firms that do not warn. We also find that investor reaction to both warning and non-warning firms is positively related to the firms' long-run stock and operating performance. These findings support the argument that investors do not overreact to the warnings but base their reaction on anticipated long-term performance of the firms.     

金融同业活动与实体企业经营风险——来自地区层面同业存单业务的证据

本文研究了地区层面金融同业活动对实体企业经营风险的影响。基于各省份金融机构开启同业存单业务的研究表明,地区层面金融同业活动显著提升了当地上市企业股价大幅下跌的风险。进一步研究表明,随着同业存单业务的发展,当地上市企业债务融资成本和风险水平有所上升,而业绩表现和市场价值有所下降。上述发现表明,企业融资链条变长后,信贷市场道德风险上升,部分企业因风险偏好增强导致经营风险上升,更容易突然出现负面事件而导致股价大幅下跌。本文的发现揭示了金融同业活动存在监管规避的可能性及其影响实体企业的潜在路径,凸显了完善金融监管以更好服务实体经济发展的重要现实意义。     

金融同业活动与实体企业经营风险——来自地区层面同业存单业务的证据

本文研究了地区层面金融同业活动对实体企业经营风险的影响。基于各省份金融机构开启同业存单业务的研究表明,地区层面金融同业活动显著提升了当地上市企业股价大幅下跌的风险。进一步研究表明,随着同业存单业务的发展,当地上市企业债务融资成本和风险水平有所上升,而业绩表现和市场价值有所下降。上述发现表明,企业融资链条变长后,信贷市场道德风险上升,部分企业因风险偏好增强导致经营风险上升,更容易突然出现负面事件而导致股价大幅下跌。本文的发现揭示了金融同业活动存在监管规避的可能性及其影响实体企业的潜在路径,凸显了完善金融监管以更好服务实体经济发展的重要现实意义。     

REIT Open-Market Stock Repurchases and Profitability

This study examines whether the announcement of real estate investment trust (REIT) open-market stock repurchase programs contain information content about future operating performance over the period 1990–2001. We find no evidence that REIT stock buybacks are positively related to the operating performance. In fact, the operating performance of our sample REIT firms peak at the repurchase announcement year and deteriorate in the years following the announcement of share repurchases. Nevertheless, the sample REITs show higher levels of post-repurchase operating performance when compared to those of the pre-repurchase period. Additionally, our regression analysis shows that changes in future operating performance can explain the positive announcement effect.     

Determinants of corporate ownership and board structure: evidence from Singapore

This study examines the determinants and interrelationships among corporate ownership and board structure characteristics using a sample of Singapore listed firms. The institutional environment in Singapore differs from that in many developed Western economies in several important respects, including a weak market for corporate control, more concentrated stock ownership, and significant government ownership in many private sector firms.Three characteristics—board composition, board leadership structure and board size—are used to capture the monitoring ability of the board. These board characteristics are assumed to be endogenously determined, together with two ownership characteristics, managerial ownership and blockholder ownership. We use two-stage least squares regression to estimate the determinants of board and ownership characteristics. Our findings indicate that corporate ownership and board structures are related, and that there are significant interrelationships among board structure characteristics. The proportion of outside directors is negatively related to managerial ownership, board size and government ownership. The use of a dual leadership structure is positively related to blockholder ownership, and negatively related to regulation and to CEO tenure.