The Impact of Stock Option Incentive on Earnings Volatility Under Economic Policy Uncertainty

This study aims to verify the effect of stock option compensation paid to executives on company’s earnings volatility. To this end, we looked at the impact of stock option compensation on executives' decision-making under economic policy uncertainty (EPU). We empirically demonstrated that stock option compensation can appropriately adjust the profit volatility of a stock option compensation. An empirical analysis was conducted by dividing the entire sample into large companies and small and medium-sized companies, and as a result, statistically supporting the favorable effect of stock option compensation for managers under economic policy uncertainty on corporate profit volatility