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Determinants of stock option use by Japanese companies
Author(s) -
Uchida Konari
Publication year - 2005
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2005.08.001
Subject(s) - keiretsu , business , corporate governance , leverage (statistics) , agency cost , stock (firearms) , debt , shareholder , monetary economics , financial system , finance , financial economics , economics , mechanical engineering , machine learning , computer science , engineering
Japanese data show a negative relation between leverage and the probability of firms' use of stock options. Such a relation is more marked for firms affiliated with specific keiretsu or main banks. This evidence reflects the fact that Japanese companies are more reliant on debt financing and that the agency cost of debt is a central issue in corporate governance. Results show that the frequency of the firms' use of stock options is positively associated with firm size. Finally, independent firms, which reveal more concern about shareholder wealth, are more likely to use stock options.