Stock derivatives and seasoned equity offerings

PurposeThe article aims to explore if stock derivative types (stock options and stock warrants) are associated with stock returns for firms undergoing seasoned equity offerings (SEOs).Design/methodology/approachThe authors regress stock returns against stock derivatives for periods around SEO announcements with standard errors clustered at the month level.FindingsThe authors find that lower stock derivatives holdings for the fiscal year after the SEO are associated with superior pre-SEO returns. This can be explained by owners exercising their derivatives to capitalize on the pre-SEO price run-up. The authors find that greater stock option holdings by insiders for the fiscal year after the SEO are associated with superior post-SEO returns for up to ten years after the SEO announcement. This new finding does not hold for stock warrants.Research limitations/implicationsStock derivatives are supplied by Capital IQ. Given their description, the authors infer that stock options are owned largely by insiders. Thus, the insider conclusions for stock options depend on this implication.Practical implicationsStock options and stock warrants can be used strategically to reward stock derivative owners of strong performing firms for past performance. Stock options can be used to motivate insiders (primarily key executives) to achieve superior future performance.Originality/valueThis study is unique in comparing the influence of holdings for stock options and stock warrants on stock price performance around SEOs. The authors show that the sign of the association depends on whether the test includes pre-SEO periods.

Stock options: do they influence dividend payments?

Purpose This study aims to investigate whether there is any influence of the option plan to purchase shares protected from dividends to determine the distribution of dividends in Brazilian companies. Design/methodology/approach The authors used a Tobit dynamic and regressive regression model because their sample has an index higher than 30% of companies that do not pay dividends. The sample includes companies that pay dividends or not and pay their executives with executive stock option plans and is composed of 1,990 observations from 356 companies from 2010 to 2016. Findings The results indicated that the presence of a dividend protection clause has a positive association with the distribution of dividends. The authors sought to clarify that companies with a stock option plan protected by the distribution of dividends face fewer restrictions on the distribution of dividends. The authors found that most companies still use only stock options to benefit middle-ranking positions and fit the plan in their remuneration policy. The monitoring of these plans lasts an average of seven years, and specific acquisition conditions are not established with their beneficiaries, who must remain in the company and observe performance metrics. Originality/value This study is relevant because the relationship between dividends and stock options has not yet been analyzed in Brazil, especially concerning a dividend-protected option plan, which is a relatively recent modality, even unknown to some companies.

EXPRESS: Conflict or Alignment? The Role of Return-oriented Foreign Shareholders and Domestic Relational Shareholders in Mitigating Earnings Management

This study investigates the effects of foreign return-oriented shareholders and domestic relational shareholders of Japanese companies on the earnings management behavior of their invested firms when stock option pay is adopted. We theorize that foreign shareholders seek short-term returns and do not engage in close monitoring due to an information disadvantage while domestic shareholders prevent managerial behavior that distorts information disclosure. Our findings show that managers of firms that use stock option pay engage in earnings management to increase their private financial benefits and meet capital markets’ expectations, which allows them to enhance their own reputation. However, this managerial behavior is contingent on the firm’s ownership structure. Our results show that while foreign shareholders enhance the positive impact of stock options on earning management, domestic shareholders and affiliated directors mitigate this positive effect. Our empirical analyses support the argument that ownership heterogeneity is a key determinant of managerial propensity to engage in earnings management when Japanese firms adopt stock option pay.

Delivered Successfully an Open Hole Side-Track from Very Challenging Formation Through Very Narrow MD Window: A Case Study from Kuwait

This article presents a unique case study where operating company, Kuwait Oil Company (KOC), decided to make an attempt to perform open hole side-track through a very narrow side-track window along with other exiting conditions such as severe downhole losses and drill through very challenging formation. To deliver such project in first attempt requires very detailed planning, close coordination with various service partners such as directional drilling and cementing. Placing a good side-track cement plug in such formation was a challenge, and 2nd challenge to get kicked off from this narrow window in first attempt which was the key. In case of failure, whip stock option has to be planned as a contingency, which possess new challenging of opening a depleted zone leading to commingling low/high pressure formation which could cause a complicated problem such as borehole stability, leads to stuck pipe problem. Failure to side-track from open hole could end of planning to drill extra hole which required extra casing string to run which will put this project well over AFE and heavily impact on well objective. This open hole Side-track was planned because while drilling original hole (12 ¼" hole section) close to planned well TD, experienced complete losses. In attempt to cure the losses, LCM was pumped with no success. Performed thixotropic cement plug job for losses control. While performing thixotropic cement plug job, the cement flash set before finishing the displacement, leading to stuck string. After backing off string and fishing attempts, unable to recover the fish completely. Fish left in hole leading to only 68 ft of open hole window available to side-track where performing a cement job was impossible due to severe losses. Only way to secure the well is to try for open hole side-track. With existing sever loss situation for initiating open hole side-track was a serious challenge due to lack of side force and flow restriction to initiate the side-track. Extensive pre-job planning, peer review and risk assessment was done in coordination with various service partners to deliver such challenging side-track. A hazard analysis decision tree was established to pinpoint the risks and appropriate mitigation measures along with contingency plan put in place. A detailed side-track guidelines was shared and review with the field crew. The wellbore was successfully side-tracked through a challenging reactive shale formation in a first attempt using a customized kick-off BHA, which not only helped to avoid loss zone in side-tracked hole but also provide additional cost savings to the company. The good hole condition at the side-track point was important to enable smooth passing of the following directional BHA to achieve directional goals.

Sosialisasi Management / Employee Stock Option Program (MESOP) Bagi Pengurus Serikat Pekerja Di Kabupaten Karawang Dalam Rangka Peningkatan Partisipasi Kepemilikan Dan Kesejahteraan Pekerja

Management / employee stock option program di Indonesia merupakan program untuk peningkatan kesejahteraan pekerja menjadi hal yang penting untuk dipahami oleh tenaga kerja di Indonesia. Program MESOP atau ESOP merupakan suatu program perusahaan yang memungkinkan para karyawan untuk turut serta memiliki saham dari perusahaan tempat mereka bekerja. Tujuan dari program ini adalah sebagai sarana bagi perusahaan untuk memberikan apresiasi kepada karyawannya, serta dapat menciptakan keselarasan kepentingan antara pemegang saham perusahaan dengan manajemen dan karyawan perusahaan tersebut. Dalam pengabdian pada masyarakat ini akan memberikan sosialisasi mengenai Program MESOP yang dilaksankan oleh Tim Pengabdian Kepada Mayarakat (PPM) Fakultas Hukum Universitas Padjadjaran. Metode yang dipergunakan dalam kegiatan ini adalah diskusi terarah dengan sasaran Pengurus Serikat Pekerja di perusahaan-perusahan, pengurus Serikat Pekerja cabang Kabupaten Karawang, sehingga dapat memahami dan menjalankan program MESOP untuk peningkatan kesejahteraan Pekerja. Hasil Kegiatan Pengabdian Pada Masyarakat ini dapat memberikan tambahan pengetahuan dan pemahaman bagi pengurus serikat pekerja sehingga kedepannya dapat diajukan untuk masuk dalam ketentuan dalam perjanjian kerja bersama sebagai program yang dapat dijalankan oleh perusahaan dan pekerja.

Impact of Employee Stock Ownership Plans on Productivity in Video Game Companies

The article deals with the importance of ESOPs (employee stock option plan) for the motivation of key employees of companies producing and publishing computer games. The conducted literature review led to the identification of a motivation model that explains how ESOPs can affect the motivation of employees in this industry. An analysis of the available studies on the importance of ESOPs for employee motivation revealed the existence of at least one key success factor of ESOPs—psychological ownership. The empirical study includes an ESOP analysis of five computer game companies listed on the Warsaw Stock Exchange in terms of changes in the dynamics of employee productivity caused by an ESOP. One of the most important discoveries is the relationship between productivity and the structure of the ESOP, in particular the percentage of company shares that were offered to its participants.

Restricted Stock is on the Rise: What Does this Mean for Whistleblowing?

The use of restricted stock compensation to supplement or to give a bonus to executives is on the rise. What happens when things go wrong? Research finds that those in private companies are less likely to whistleblow than those in public companies overall. Literature also reveals that restricted stock may positively influence whistleblowing when large financial rewards are present. Further, vesting period and strike price influence whistleblowing for those with stock option compensation. Yet, little is investigated regarding whistleblowing related to the vesting period of the restricted stock and the type of organization -public or private- granting this compensation. We find that for those in public companies, whistleblowing tends to increase as the vesting period of the stock compensation is farther in the future. Those in private companies have the opposite behavior. Agency theory focused within whistleblowing theory helps resolve this seeming juxtaposition. Implications for practice and policy are offered.

Effects of CEO and COO overconfidence on the firm's inventory leanness

PurposeThis study examines whether the behavioral attributes, such as overconfidence, of chief executive officers (CEO) and chief operating officers (COO) affect firm's inventory leanness. If they do, how are they interacting with each other? Moreover, incorporating market competition into the analysis, this study explores how the competition moderates the relationship between managerial overconfidence and inventory leanness.Design/methodology/approachUsing a large panel data of US manufacturing firms between 1998 and 2015, this study measures top managers' overconfident characteristics using stock option information. Then, a panel regression analysis is adopted to test the effects of managerial overconfidence on inventory leanness. Moreover, a moderation model is applied to investigate the interaction effects of market competition.FindingsFirms with overconfident COOs (CEOs), other circumstances being equal, increase (decrease) the inventory leanness as the market becomes more competitive.Practical implicationsThe study suggests that firms should understand top managers' behavioral characteristics to manage inventory efficiently. Collectively, CEOs (COOs) tend to increase (decrease) inventory levels due to their overconfidence as the market gets competitive. Firms should establish a systematic process to be reviewed by diverse stakeholders to deal with managerial overconfidence.Originality/valueThis study is an exploratory study that examines whether and how top management's behavioral attribute relates to a firm's operations performance. It underlines that CEO and COO's overconfident characteristics determine the inventory leanness when market competition is considered. Numerous studies on firm-level strategies emphasized the top managers' overconfidence as a key factor. However, behavioral characteristics at the top management level have rarely been studied in operations management fields. Based on the results, scholars could compare and understand the effects of CEO and COO overconfidence to provide insights into inventory management.

Fair and Square: A Retention Model of Managerial Compensation

We propose a model of how the retention motive shapes managerial compensation contracts. Once employed, a risk-averse manager acquires imperfectly portable skills whose value is stochastic because of industry-wide demand shocks. The manager’s actions are uncontractible, and the perceived fairness of the compensation contract affects the manager’s motivation. If the volatility of profits is sufficiently large and outside offers are sufficiently likely, the equilibrium contract combines a salary with an own-firm stock option. The model’s predictions are consistent with empirical regularities concerning contractual shape, the magnitude of variable pay, the lack of indexation, and the prevalence of discretionary severance pay. This paper was accepted by Axel Ockenfels, behavioral economics and decision analysis.

Airline Chief Executive Officer and Corporate Social Responsibility

The aim of this research is to explore the determinants of airline CSR. Stakeholder theory is the theoretical underpinning. Chief executive officers (CEOs) are the research target, which is theoretically underpinned by upper echelon theory. For data collection, this study used data from COMPUSTAT, EXECUCOMP, KLD MSCI, LinkedIn, and the Bureau of Economic Analysis. Standard industry classification code 4512 was employed to obtain information on airline companies. Moreover, the number of observations was 154, the number of firms was 15, and the study period was 1999–2016. CSR domains include employment, the environment, and the product. The explanatory attributes are the CEO’s age, tenure, education, share ownership, stock option, and duality. Ordinary least squares and feasible generalized least squares regression analyses were executed for hypothesis testing. Regarding the results, employment CSR was positively affected by CEO age. This study found an inverted U-shaped relationship between CEO tenure and environmental CSR. Environmental CSR was also negatively influenced by stock options. Product CSR was positively associated with CEO age, whereas it was negatively associated with CEO duality.