IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v50y2014is5p197-213.html
   My bibliography  Save this article

Option-Based Compensation, Corporate Investment Policy, and Stock Repurchases

Author

Listed:
  • Ming-Cheng Wu
  • I-Cheng Lin
  • Meng-Fang Chen

Abstract

Taking account of the business life cycle, this paper investigates the impact of the proceeds associated with stock option exercises on investment expenditures and stock repurchases. The results reveal that the proceeds associated with option exercises could add internal funds to firms and contribute to investment in research and development and capital expenditures, especially in the growth stage of a firm’s life cycle. This paper also shows the positive relationship between option proceeds and stock repurchases in the stagnant stage of that cycle. The empirical results further suggest that stock repurchases may substitute for dividends. In summary, the paper empirically demonstrates that stock options not only encourage employees to work harder, but also create more funds for the firm.

Suggested Citation

  • Ming-Cheng Wu & I-Cheng Lin & Meng-Fang Chen, 2014. "Option-Based Compensation, Corporate Investment Policy, and Stock Repurchases," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S5), pages 197-213, September.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:s5:p:197-213
    DOI: 10.2753/REE1540-496X5005S514
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2753/REE1540-496X5005S514
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.2753/REE1540-496X5005S514?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:50:y:2014:i:s5:p:197-213. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.