Abstract
Does option-based compensation affect payout policyé 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.
Original language | English (US) |
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Pages (from-to) | 291-329 |
Number of pages | 39 |
Journal | Journal of Financial and Quantitative Analysis |
Volume | 55 |
Issue number | 1 |
DOIs | |
State | Published - Feb 1 2020 |
Externally published | Yes |