Journal of Financial and Quantitative Analysis Vol. 55 No. 1 2020
Does Option-Based Compensation Affect Payout Policy? Evidence from FAS 123R
Abstract
Does option-based compensation affect payout policy? To address this question, we examine the adoption of mandatory expensing of stock options. Our identification strategy exploits the fact that the reduction in option-based compensation after the accounting change varies with the firm-specific expected accounting impact. Across a battery of tests, we do not find that (accounting-driven) reductions in option-based pay cause dividends to increase or repurchases to decrease. Our results contrast with the widely held belief that option-based pay has a significant causal influence on payout policy and cast doubts on its role in the shift from dividends to repurchases.
- DOI
- 10.1017/s0022109018001114
- Volume
- 55
- Issue
- 1
- Pages
- 291-329
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref