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IMPACT OF DIVIDEND‐PROTECTED EMPLOYEE STOCK OPTIONS ON PAYOUT POLICIES: EVIDENCE FROM TAIWAN
Author(s) -
Wu MingCheng,
Kao Erin H. C.,
Fung HungGay
Publication year - 2008
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2008.00411.x
Subject(s) - dividend , dividend payout ratio , dividend policy , profitability index , monetary economics , business , cash flow , stock (firearms) , economics , debt , non qualified stock option , cash , restricted stock , finance , stock market , mechanical engineering , paleontology , horse , engineering , biology
. This study used a sample of 1035 Taiwanese firms to examine the impact of dividend protected employee stock options on stock repurchase and cash dividend policies from 2000 to 2005. This study finds a positive relationship between cash dividends and executive options, implying that executives holding stock options might prefer to distribute cash dividends to boost the stock price. This result, unlike in earlier studies, arises from the dividend protected characteristic of Taiwanese employee stock options. Finally, free cash flow, firm profitability, level of debt, investment opportunities and firm size are found to considerably influence payout decisions.