Title: The association between executive stock options and corporate performance: evidence from Portugal

Authors: Sandra Alves

Addresses: School of Accountancy and Administration, University of Aveiro, Campus Universitario de Santiago, Aveiro 3810-193, Portugal

Abstract: Stock options are theoretically adopted to better align the interests of the managers and shareholders, thereby reducing agency costs, and consequently increasing corporate performance. The critical question is whether stock options have this impact in practice. Consequently, this study investigates if stock options attribution has impact on corporate performance of Portuguese listed firms on the Euronext Lisbon. The results suggest that stock options grant is negatively related with firm|s performance. Hence, this study corroborates the rent extraction hypothesis, the crowding-out hypothesis and the multi-tasking effect, which suggest that stock options may affect adversely firm|s performance.

Keywords: agency theory; crowding-out theory; multi-tasking effect; incentives; executive stock options; corporate performance; Portugal; firm performance; rent extraction hypothesis.

DOI: 10.1504/IJBGE.2011.039969

International Journal of Business Governance and Ethics, 2011 Vol.6 No.2, pp.203 - 223

Published online: 08 May 2011 *

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