What lies beneath the implementation of expensing equity-based compensation?

Hsuan Chu Lin, Ren Raw Chen, Ting Kai Chou, Michael Long

研究成果: Article同行評審


This study explores whether SFAS 39, which mandated expensing of equity-based compensation (EBC) causes an unexpected wealth reallocation between debtholders and shareholders. Through a structural framework under the economic measure, we theorize that mandatory EBC expensing affects the priority of free cash flow payment mechanisms and thereby transfers firm value to equity at the expense of debt. Based on 582 Taiwan listed firms over the period 2005–2010, we empirically find that a significant increase in equity value as a percentage of firm value for firms that were affected by EBC expensing rule, compared to firms that were not affected. The wealth transfer from debtholders to shareholders is more salient for heavy EBC users. We also document that firms with more intensive debtholder-shareholder conflicts experience a larger wealth transfer than their counterparts do. Overall, our analyses suggest that mandated expensing of EBC leads to a value transfer from debt to equity.

頁(從 - 到)78-93
期刊Pacific Basin Finance Journal
出版狀態Published - 2017 12月

All Science Journal Classification (ASJC) codes

  • 金融
  • 經濟學與計量經濟學


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