Incentive Alignment Functions of the Executive Stock Option with Different Industries

• Main Authors: Chen, Chin-Wei, 陳瑾維
• Other Authors: Wu, E-Ching
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/05666963454372387160

碩士 === 靜宜大學 === 財務金融學系 === 99 === In order to retain the talent managers and cut down the cost of hiring, many companies granted lots ESOs to managers during financial crisis in 2008. As associated press reported, many managers get large benefits from their granted ESOs in the recovery of economy during recent years. This study’s primary objective is to examine the incentive alignment functions of ESO among different industries. We employ the monte-carlo simulation method to value ESO price, and calculate the Greek letter, delta and vega, to inspect the incentive alignment functions of ESO. From the simulation results, we find that the incentive aligned effect of ESO in the electronic industry, which prefers to issue ESO, is lowest among the industries studied. In addition, the strongest incentive effect of ESO is appeared in the energy industry. The difference of the alignment functions of ESO among different industries arises from their idiosyncratic characteristics. We also find the ESO granted in finance industry possesses incentive function to increase stock price, while not to increase the manager’s risk-taking behavior. This result is consistent with the finding in other literatures. Besides, we find another interesting outcome that the ESO granted in public industry, which never issue it, also owns some incentive aligned ability to alleviate the agency problem.