The Impact of Disclosure of Employees'' Bonus Information on Stock Values

• Main Authors: Shu-Wen Chang, 張淑雯
• Other Authors: Chun-Mei Ma
• Format: Others
• Language: zh-TW
• Published: 2000
• Online Access: http://ndltd.ncl.edu.tw/handle/52554396891219674416

碩士 === 東吳大學 === 會計學系 === 88 === ABSTRACT Employees’ bonuses paid in stock in Taiwan is calculated at its par value of NT10 and treated as distribution of earning. On the other hand, Employee Stock Option (ESO) in the States is calculated at its market value and appeared as compensation expense. Problems with the inconsistencies in the application of accounting methods arose when The International Trade Committee (ITC) of the US ruled against Taiwan for violating the Anti-Dumping Law in the case of SRAM in 1998. This paper focuses on the disclosure requirements of a firm’s Employees’ bonuses information to truly reflect the profitability of the firm. In this study, I will use listed high-tech electronic companies in Taiwan to determine: 1) the relationship between disclosure or non-disclosure of Employees’ bonuses information and CAR, and 2) the impact of Employees’ bonuses on a firm’s share value. The study shows that: 1. For the employees, receiving stock as bonuses has similar result with exercising a stock option that has an exercise price of zero to receive the firm’s stock. American corporate treats ESO as an integral part of the employee’s compensation package and therefore it is entered as the compensation expense. For Taiwanese firms, however, Employees’ bonuses is only applicable when the firm profits and it is thus not considered as an indispensable part of the operation cost. 2. Most non-employee shareholders fail to recognize the diluting effect of Employees’ bonuses on the firm’s income statement mainly due to the following three reasons: a) The employee compensation policy is highly confidential; b) The dilution is not immediately reflected on the stock value the day of Employees’ bonuses announcement; c) Investors generally regard the dilution as another form of investment since Employees’ bonuses provides incentive for employees to generate more profits for the company. 3. The incentives derived from employee stock option plans provide value-increasing benefit to the firm. In general, stock options (a) align the interests of management, employees and shareholders; (b) attract and retain key employees; (c) reward employees by an ownership interest in the company; and (d) create a relationship between compensation to employees and the company''s financial goals.