Determining fair values of performance‐vested and forfeiture‐embedded employee stock options |
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Authors: | Ming‐Cheng Wu I‐Cheng Lin |
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Institution: | Department of Business Education, National Changhua University of Education, Changhua, Taiwan |
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Abstract: | This study provides a new approach to determine the fair value of ESOs by extending the performance‐vested option pricing model. The model developed in this study takes both vesting period and forfeiture rate into consideration to capture characteristics of ESOs. Empirical and sensitivity analyses give evidence for the importance of these two elements. Empirical results also support that the derived model can be employed to increase the accuracy of ESOs’ fair value. |
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Keywords: | Employee stock options Fair value Employee forfeiture Performance‐vested option G12 G13 M52 |
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