Journal of Corporate Finance Vol. 10 No. 4 2004
Stock options and employees' firm-specific human capital under the threat of divestitures and acquisitions
Abstract
This paper considers whether the first-best level of firm-specific human capital investment is attained by the use of stock option plans for workers and stock offers in acquisitions even though workers are threatened with the possibility of a divestiture and acquisition. We show that the first-best level of investment is achieved by a stock option plan with a positive exercise price for workers conditional on the event of a divestiture. We also suggest that, under certain conditions, a stock offer in acquisition can resolve a collusion problem between the target firm (TF) and its workers.
- DOI
- 10.1016/s0929-1199(03)00026-9
- Volume
- 10
- Issue
- 4
- Pages
- 615-638
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref