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The Effects of Non‐Expensed Employee Stock Bonus on Firm Performance: Evidence from T aiwanese High‐Tech Firms
Author(s) -
Liu NienChi,
Chen MingYuan,
Wang MeiLing
Publication year - 2016
Publication title -
british journal of industrial relations
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.665
H-Index - 70
eISSN - 1467-8543
pISSN - 0007-1080
DOI - 10.1111/bjir.12051
Subject(s) - incentive , stock (firearms) , profitability index , stock options , restricted stock , business , economics , context (archaeology) , stock market , microeconomics , finance , mechanical engineering , paleontology , engineering , biology
The choice of whether to expense broad‐based stock incentives has been a highly controversial debate in both academic research and practice circles. We provide insightful findings to reconcile certain debates regarding the effectiveness of non‐expensed, broad‐based stock incentives. Using a unique longitudinal dataset from T aiwanese high‐tech firms over the 1997–2008 period, our results indicate that non‐expensed employee stock bonus incentives exerted positive effects on short‐term organizational value added creation. The dilution effects of broad‐based stock incentives in T aiwan, however, exerted a negative influence on profitability and eroded share return. The negative effects were even more severe in the following year, and overexploitation of employee stock bonus also damaged the long‐term organizational performance of T aiwanese high‐tech firms. This negative aspect of non‐expensed employee stock incentives resulted in more evidence for changing the regulatory context of broad‐based stock incentives in T aiwan.