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Employee Stock Options Plans and the Value of Brazilian Companies

Author

Listed:
  • Fernanda Finotti Cordeiro Perobelli

    (Universidade Federal de Juiz de Fora)

  • Bruno de Souza Lopes

    (Universidade de São Paulo (USP))

  • Alexandre Di Miceli da Silveira

Abstract

This work investigates the effects of Employee Stock Options Plans (ESOP) on the value of companies in the Brazilian Stock Exchange (BM&FBOVESPA). An ESOP is a mechanism of variable compensation, generally offered to executives, having the alignment of interests between managers and shareholders as one of its goals. To achieve this purpose, a panel data analysis was used in order to try measuring if the ESOP generated or not value to shareholders. The results show that there is evidence that the ESOP only generates wealth for shareholders when it is well-set, specifically when the exercise price is fixed at-money or out-of-money. An increase in the stock price is also achieved when companies adopt best practices of corporate governance and the ESOP by more than three years.

Suggested Citation

  • Fernanda Finotti Cordeiro Perobelli & Bruno de Souza Lopes & Alexandre Di Miceli da Silveira, 2012. "Employee Stock Options Plans and the Value of Brazilian Companies," Brazilian Review of Finance, Brazilian Society of Finance, vol. 10(1), pages 105-147.
    • Handle: RePEc:brf:journl:v:10:y:2012:i:1:p:105-147
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    More about this item

    Keywords

    Employee Stock Options Plans; Corporate governance; Variable compensation; Panel data;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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