Share-option based compensation expense, shareholder returns and financial crisis

Abstract

This paper contributes to the literature that analyses the relationship between Share-Option Based Compensation (SOBC) expense and shareholder returns. It utilises a sample of financial firms listed in the European Economic Area and Switzerland between 2005 and 2016 to make inferences about the impact of the financial crisis on the above-mentioned relationship. The paper also assesses the extent to which the relationship between SOBC expense and shareholder returns during the financial crisis varies with ownership concentration. We find evidence that the positive relationship between SOBC expense and shareholder returns is significantly more apparent during the financial crisis. This suggests that investors place more emphasis on the unrecognised intangible features of SOBC contracts during the crisis, even though their associated expenses are subject to managerial discretion and measurement errors. We also find that the positive relationship between SOBC expense and shareholder returns over the financial crisis is more pronounced when ownership is more concentrated. The results of our study are robust after controlling for firm size, potential investment growth opportunities, traditional banking activities and firm self-selection bias.

Is better banking performance associated with financial inclusion and mandated CSR expenditure in a developing country?

“…The above regression models are estimated using ordinary least squares (OLS) as it is the most commonly used approach for examining a causal inference in the case of a repeated cross‐section sample (see, for example, Bose et al , 2017; Chauvet and Jacolin, 2017; Alhaj‐Ismail et al , 2019). The literature also uses two‐stage least squares (2SLS) to examine causal inference between financial variables, particularly to address reverse causality and endogeneity problems (Richardson et al , 2016; Ahmed and Ali, 2017; Ahmed et al , 2017).…”

The Impact of Industry Competition on the Value Relevance of Goodwill Impairments Across Different Information Environments

“…Our paper therefore introduces a new explanation for heterogeneity in the value relevance and timeliness of impairment information reported in prior studies (e.g., Lapointe-Antunes et al, 2009;Hamberg & Beisland, 2014;Glaum et al, 2018). Our second contribution pertains to the literature on the fair value of non-financial items with no active markets (e.g., Choudhary, 2011;Alhaj-Ismail et al, 2019). Managers largely use their estimated valuation inputs to determine goodwill impairments.…”

Does shared tenure between audit committee chair and engagement partner affect audit outcomes? Evidence from the UK

“…The blockholders variable (BLOCK) is measured as the total percentage of shares held by blockholders as reported by a firm at the end of a year 19 . The presence of blockholders can be considered as an effective oversight mechanism in firms (Alhaj-Ismail et al, 2019;Beasley, 1996). We also control for auditor size using the BIG4 as a dummy variable.…”