tailieunhanh - THE IMPACT OF EMPLOYEE STOCK OPTIONS ON THE EVOLUTION OF COMPENSATION IN THE 1990s

Despite the importance of the topic, however, there appears to be essentially no evidence on the link between option grants and firm riskiness. Guay (1997) finds, in 1988 data (which largely predates the option explosion) that firms appear to grant options more frequently in companies with growth opportunities, which is consistent with the explanation that firms may attempt to use options to increase risk-taking. Likewise, Tufano (1998) finds evidence in gold mines that managers with more options hedge gold price risk less. Using data from 1978 through 1982, DeFusco et al. (1990) find a positive stock market reaction and a negative bond. | NBER WORKING PAPER SERIES THE IMPACT OF EMPLOYEE STOCK OPTIONS ON THE EVOLUTION OF COMPENSATION IN THE 1990s Hamid Mehran Joseph Tracy Working Paper 8353 http papers w8353 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge MA 02138 July 2001 FederalReserve Bank ofNew Y ork. We benefitted fromhelpfuldiscussions with Alan Marcus Elizabeth Keating and comments from seminar participants at the Department ofLabor and the Georgetown University Law Center Conference on Contracts with Highly Skilled Workers. John Campbell Martin Lettau and John Graham kindly provided US with a portion of their data. We thank Nathanial Baum-Snow and Dan Burdick for their excellent research assistance. We also thank Hewitt Associates for providing summaries of their data and technical assistance and Thermo Electron for providing US with the information on details of its employee stock options program and reporting. The views expressed herein are those of the authors and not necessarily those of the National Bureau ofEconomic Research the Federal Reserve Bank ofNew York or the Federal Reserve System. 2001 by Hamid Mehran and Joseph Tracy. All rights reserved. Short sections of text not to exceed two paragraphs may be quoted without explicit permission provided that full credit including notice is given to the source. The Impact of Employee Stock Options on the Evolution of Compensation in the 1990s Hamid Mehran and Joseph Tracy NBER Working Paper No. 8353 July 2001 JELNo. J33 J38 GIO ABSTRACT Between 1995 and 1998 actual growth in nominal compensation per hour CPH accelerated from approximately 2 percent to 5 percent. Yet as labor markets continued to tighten in 1999 the growth in CPH paradoxically slowed. In this article we attempt to solve this aggregate wage puzzle by exploring whether changes in pay structure - specifically the increased use of employee stock options - can account for the behavior of CPH in the late 1990s. CPH reflects employee stock .