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Valuing Employee Stock Options: Implications for the Implementation of NZ IFRS 2

dc.contributor.authorBoyle, Glenn
dc.contributor.authorClyne, Stefan
dc.contributor.authorRoberts, Helen
dc.date.accessioned2015-02-11T21:38:41Z
dc.date.accessioned2022-07-06T22:34:35Z
dc.date.available2015-02-11T21:38:41Z
dc.date.available2022-07-06T22:34:35Z
dc.date.copyright15/07/2005
dc.date.issued2005
dc.description.abstractFrom 2007 New Zealand firms must report the cost of granting employee stock options (ESOs). Market-based option pricing models assume that options are continuously tradable and thus that option holders are indifferent to the specific risk of the firm. ESOs by contrast cannot be traded and so their cost depends on the risk aversion and under-diversification characteristics of the recipient. Using hypothetical ESOs we show that ESO cost is extremely sensitive to employee characteristics thereby casting doubt on the usefulness of any market-based model. Incorporating early exercise in the latter does nothing to resolve this problem because the optimal exercise policy is itself dependent on holder characteristics which are typically unobservable. Vesting restrictions help reduce the magnitude of error.en_NZ
dc.formatpdfen_NZ
dc.identifier.urihttps://ir.wgtn.ac.nz/handle/123456789/18949
dc.language.isoen_NZ
dc.publisherTe Herenga Waka—Victoria University of Wellingtonen_NZ
dc.rightsPermission to publish research outputs of the New Zealand Institute for the Study of Competition and Regulation has been granted to the Victoria University of Wellington Library. Refer to the permission letter in record: https://ir.wgtn.ac.nz/handle/123456789/18870en_NZ
dc.titleValuing Employee Stock Options: Implications for the Implementation of NZ IFRS 2en_NZ
dc.typeTexten_NZ
vuwschema.contributor.unitNew Zealand Institute for the Study of Competition and Regulationen_NZ
vuwschema.contributor.unitVictoria Business School: Orauarikien_NZ
vuwschema.subject.anzsrcfor149999 Economics not elsewhere classifieden_NZ
vuwschema.subject.anzsrcforV2389999 Other economics not elsewhere classifieden_NZ
vuwschema.type.vuwWorking or Occasional Paperen_NZ

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