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Panu Kalmi
''Stock option compensation and equity values''
( 2006, Vol. 10 No.2 )
I present a model where increasing employee participation in a stock option scheme leads to higher performance but with a cost to shareholders. I show that firms with higher market values per employee are more likely to have an option scheme and they offer stock options to a broader group of employees. The model yields empirical predictions that are consistent with the stock option boom of the late 1990s and their reduced popularity after the stock market decline.
Keywords: compensation
JEL: J3 - Wages, Compensation, and Labor Costs: General
Manuscript Received : Mar 06 2006 Manuscript Accepted : Mar 08 2006

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