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Employee Stock Options, Payout Policy, and Stock Returns

Shareholders and Optionholders in Large U.S. Technology Corporations


Wojciech Grabowski

The book investigates empirically mechanisms behind the recent widespread use of employee stock options and share repurchases in corporate financial management. Exploring through econometric models a sample of large U.S. technology corporations in the period between 1997 and 2005, it documents complex links between stock option plans, payout policy and other key financial characteristics of these firms. The models highlight the interplay between the interests of long-term shareholders, optionholders and speculative investors and provide estimates of joint effects of option dynamics and repurchases on stock returns, undervaluation and option plans on payout policy as well as risk taking and revenue growth on payoffs to shareholders and optionholders.

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