We investigate the impact of independent valuation specialists on the downward bias of pre-initial public offering employee stock option valuations. Undervalued stock price estimates underlying firms' option grants produce option valuations that overstate earnings and provide employees with deep...

This paper develops a new pricing model for American-style indexed executive stock options. We rely on a basic model framework and an indexation scheme first proposed by Johnson and Tian (2000a) in their analysis of European-style indexed options. Our derivation of the valuation formula...

We propose a new framework to value employee stock options (ESOs) that captures multiple exercises of different quantities over time. We also model the ESO holder's job termination risk and incorporate its impact on the payoffs of both vested and unvested ESOs. Numerical methods based on Fourier...

We examine the ex-ante optimality of repricing of executive stock options while considering the tax effects of new accounting rules associated with traditional repricing. Although there has been a body of empirical literature on repricing, the optimality of repricing after considering the...

Executive stock options (ESOs) are widely used to reward employees and represent major items of corporate liability. The International Accounting Standards Board IFRS9 financial reporting standard which came into full effect on 1-Jan 2018, along with its Australian implementation AASB9, requires...

As of February 28, 2006, 958 publicly held companies accelerated the vesting of some or all of their employee stock options in advance of adopting SFAS 123 (R). We examine both the market reaction to these accelerations, as well as the determinants of the decision. Investors, in general, react...

Employee stock option schemes have become increasingly prevalent over the past decade or so. This situation may, or may not, change due to recent accounting regulation that demands that stock options be expensed - quite simply because expensing reduces earnings. This must impact on the incentive...

We examine whether and how firm characteristics, including firm size and liquidity and the implementation of a new share-based compensation recognition rule affect the relation between the employee stock option (ESO) grants (as proxied by the disclosed ESO expenses) and firm value. Prior studies...

We present an algorithm that merges a certainty-equivalence framework with the least-squares Monte Carlo algorithm to obtain the executive stock option (ESO) value for a risk-averse and undiversified agent. We account for the difference between executive's value and firm cost of the ESO. We show...

We implement a flexible simulation-based approach for the fair value of employee stock option (ESO) that accounts for the vesting period, departure risk and voluntary suboptimal early exercise. We introduce GARCH effects on the underlying asset and we analyze the price bias with respect to the...