We introduce explicitly the effort as a choice variable in a continuous time utility maximisation framework of an executive who is partly compensated with stock options. We solve the model in the case where the executive is not allowed to trade in the company’s stock but is able to achieve a...

This study integrates general measurements of the information electronics industry based on the concepts of the balanced scorecard, intellectual capital, and intangible assets. The reasons for the difference between the corporate market value and book value are also analyzed, and the impacts of...

This paper presents an alternative approach for interest rate lattice construction in the Ritchken and Sankarasubramanian (1995) framework. The proposed method applies a parsimonious induction technique to represent the distribution of auxiliary state variables and value interest rate...

This paper investigates why firms choose to divest their units/segments, and how firms choose among the three divestiture mechanisms (equity carveout, spinoff, and asset selloff). A direct comparison is conducted on firm’s viable choices on a comprehensive sample of corporate divestiture...

We argue that in an initial public offering (IPO), pre-IPO owners make decisions regarding underpricing, share retention, and share lockup simultaneously and optimally to maximize aftermarket liquidity. We predict that underpricing fosters higher trading volume in both the short run and the long...

This paper evaluates the welfare effects of limited liability on firm behavior when market power is present. A risk-neutral monopolist facing uncertain demand (with constant returns to scale technology) produces higher output, yielding higher expected profits when costless exit is induced by...

The mean-Gini framework has been suggested as a robust alternative to the portfolio approach to futures hedging given its optimality under general distributional conditions. However, calculation of the Gini hedge ratio requires estimation of the underlying price distribution. We estimate...

In this paper, we propose an empirically-based, non-parametric option pricing model to evaluate S&P 500 index options. Given the fact that the model is derived under the real measure, an equilibrium asset pricing model, instead of no-arbitrage, must be assumed. Using the histogram of past S&P...

We investigated disclosure decisions by identifying a circumstance, the spin-off of a segment, where the benefits of disclosure should outweigh the costs. We compared the valuation revisions associated with spin-off announcements of firms with previous line of business disclosures to valuation...

The variability of accounting accruals provides a measure of the normal level of managers’ accounting discretion and has important implications for event studies of earnings management. We examine how this measure is related to the economic factors including both firm characteristics and...