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The Effects of Non-Expensed Employee Stock Bonus on Firm Performance: Evidence from Taiwanese High-Tech Firms

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  • Nien-Chi Liu
  • Ming-Yuan Chen
  • Mei-Ling Wang

Abstract

The choice of whether to expense broad-based stock incentives has been a highly controversial debate in both academic research and practice circles. We provide insightful findings to reconcile certain debates regarding the effectiveness of non-expensed, broad-based stock incentives. Using a unique longitudinal dataset from Taiwanese high-tech firms over the 1997–2008 period, our results indicate that non-expensed employee stock bonus incentives exerted positive effects on short-term organizational value added creation. The dilution effects of broad-based stock incentives in Taiwan, however, exerted a negative influence on profitability and eroded share return. The negative effects were even more severe in the following year, and overexploitation of employee stock bonus also damaged the long-term organizational performance of Taiwanese high-tech firms. This negative aspect of non-expensed employee stock incentives resulted in more evidence for changing the regulatory context of broad-based stock incentives in Taiwan.

Suggested Citation

  • Nien-Chi Liu & Ming-Yuan Chen & Mei-Ling Wang, 2016. "The Effects of Non-Expensed Employee Stock Bonus on Firm Performance: Evidence from Taiwanese High-Tech Firms," British Journal of Industrial Relations, London School of Economics, vol. 54(1), pages 30-54, March.
    • Handle: RePEc:bla:brjirl:v:54:y:2016:i:1:p:30-54
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    File URL: http://hdl.handle.net/10.1111/bjir.12051
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