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Determinants of the Introduction of Stock Options by Japanese Firms: Analysis from the Incentive and Selection Perspectives

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  • Sadao Nagaoka

    (Institute of Innovation Research, Hitotsubashi University)

Abstract

This paper examines the determinants of the introduction of stock options in Japan, in response to their deregulation, from the incentive and selection perspectives. Younger firms use broad-based stock options more often, even after controlling firm size, growth, and the possibility of a liquidity constraint. Moreover, stock price volatility increases the adoption of stock options only when a firm is young. These results support the relevancy of a selection view that focuses on efficient project choice. Stock options are used more often by fast-growing firms and less in regulated industries and by the firms with concentrated ownership structure, consistent with both views.

Suggested Citation

  • Sadao Nagaoka, 2005. "Determinants of the Introduction of Stock Options by Japanese Firms: Analysis from the Incentive and Selection Perspectives," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2289-2316, November.
    • Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:6:p:2289-2316
    DOI: 10.1086/497050
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    Cited by:

    1. Kato, Takao & Kubo, Katsuyuki, 2006. "CEO compensation and firm performance in Japan: Evidence from new panel data on individual CEO pay," Journal of the Japanese and International Economies, Elsevier, vol. 20(1), pages 1-19, March.
    2. KURODA Sachiko & YAMAMOTO Isamu, 2009. "How are Hours Worked and Wages Affected by Labor Regulations?: The white-collar exemption and 'name-only managers' in Japan," Discussion papers 09031, Research Institute of Economy, Trade and Industry (RIETI).
    3. Hasegawa, Nobuhisa & Kim, Hyonok & Yasuda, Yukihiro, 2017. "The adoption of stock option plans and their effects on firm performance during Japan’s period of corporate governance reform," Journal of the Japanese and International Economies, Elsevier, vol. 44(C), pages 13-25.
    4. John P. WALSH & NAGAOKA Sadao, 2009. "Who Invents?: Evidence from the Japan-U.S. inventor survey," Discussion papers 09034, Research Institute of Economy, Trade and Industry (RIETI).
    5. Xuesong Geng & Toru Yoshikawa & Asli M. Colpan, 2016. "Leveraging foreign institutional logic in the adoption of stock option pay among Japanese firms," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1472-1492, July.
    6. Chizema, Amon, 2010. "Early and late adoption of American-style executive pay in Germany: Governance and institutions," Journal of World Business, Elsevier, vol. 45(1), pages 9-18, January.
    7. Chizema, Amon & Buck, Trevor, 2006. "Neo-institutional theory and institutional change: Towards empirical tests on the "Americanization" of German executive pay," International Business Review, Elsevier, vol. 15(5), pages 488-504, October.
    8. Doyoung Kim, 2010. "The use of stock-based pay for sorting: an empirical analysis of compensation for new CEOs," Applied Economics, Taylor & Francis Journals, vol. 42(23), pages 2999-3010.
    9. MORIKAWA Masayuki, 2012. "Stock Options and Productivity: An empirical analysis of Japanese firms," Discussion papers 12011, Research Institute of Economy, Trade and Industry (RIETI).

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