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Title: Contributions to Firm Value by Stock-Based Compensation Plans

Authors: Margaret Nowicki; Jeffrey Lippitt; Eric Lewis

Addresses: Author address listing can be found in the "About the Authors" section at the end of the article.

Abstract: The goal of this empirical research is to determine the extent to which stock option plans contribute to firm value by comparing the estimated value of each firm to its actual value. If stock based compensation packages create the expectation of higher future earnings and if these higher expected earnings are included in the current market value of a firm, then the firm's value should contain a component that is unrelated to current earnings and is related to 'investments' in stock-based compensation. This would be reflected in a higher firm value than could be expected in the absence of stock-based compensation.

Keywords: Stock-based compensation; firm value; stock option plans; expected earnings; empirical research.

DOI: 10.1504/JBM.2006.141145

Journal of Business and Management, 2006 Vol.12 No.2, pp.147 - 155

Published online: 05 Sep 2024 *