Abstract
Agency theory indicates that management ownership might reduce the conflict of interests between managers and stockholders. Several studies have supported the argument that executive compensation plans can motive executives to enhance firm performance and maintaining profit. This paper examines whether the compensation of executives through stock options influences the firm's restructuring or liquidation decisions. The findings suggest that, the higher equity incentive and the lower the value of executive stock option in executives' compensation plan, the more restucturing decisions the executive will make, even when these choices could accelerate the firm's failure. Nevertheless, there is only weak evidence that replacing the executive will increase the likelihood of restructuring decisions over liquidation decisions when the firm is facing financial distress.
| Original language | English |
|---|---|
| Pages (from-to) | 197-212 |
| Number of pages | 16 |
| Journal | International Research Journal of Finance and Economics |
| Volume | 55 |
| Publication status | Published - 2010 Nov |
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All Science Journal Classification (ASJC) codes
- Finance
- Economics and Econometrics
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Restructuring decisions and executive stock options in financially distressed firms. / Lee, Hsiu Ying; Lin, Yi Mien; Liao, Li-Kai; Chen, Chin Rong.
In: International Research Journal of Finance and Economics, Vol. 55, 11.2010, p. 197-212.Research output: Contribution to journal › Article
TY - JOUR
T1 - Restructuring decisions and executive stock options in financially distressed firms
AU - Lee, Hsiu Ying
AU - Lin, Yi Mien
AU - Liao, Li-Kai
AU - Chen, Chin Rong
PY - 2010/11
Y1 - 2010/11
N2 - Agency theory indicates that management ownership might reduce the conflict of interests between managers and stockholders. Several studies have supported the argument that executive compensation plans can motive executives to enhance firm performance and maintaining profit. This paper examines whether the compensation of executives through stock options influences the firm's restructuring or liquidation decisions. The findings suggest that, the higher equity incentive and the lower the value of executive stock option in executives' compensation plan, the more restucturing decisions the executive will make, even when these choices could accelerate the firm's failure. Nevertheless, there is only weak evidence that replacing the executive will increase the likelihood of restructuring decisions over liquidation decisions when the firm is facing financial distress.
AB - Agency theory indicates that management ownership might reduce the conflict of interests between managers and stockholders. Several studies have supported the argument that executive compensation plans can motive executives to enhance firm performance and maintaining profit. This paper examines whether the compensation of executives through stock options influences the firm's restructuring or liquidation decisions. The findings suggest that, the higher equity incentive and the lower the value of executive stock option in executives' compensation plan, the more restucturing decisions the executive will make, even when these choices could accelerate the firm's failure. Nevertheless, there is only weak evidence that replacing the executive will increase the likelihood of restructuring decisions over liquidation decisions when the firm is facing financial distress.
UR - http://www.scopus.com/inward/record.url?scp=78349298261&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=78349298261&partnerID=8YFLogxK
M3 - Article
VL - 55
SP - 197
EP - 212
JO - International Research Journal of Finance and Economics
JF - International Research Journal of Finance and Economics
SN - 1450-2887
ER -