Steven Huddart and Mark Lang, "Employee Stock Option Exercises: An Empirical Analysis," Journal of Accounting and Economics, 21, 1996, (p. 5).
This paper describes the exercise behavior of over 50,000 employees who hold long-term options on employer stock at eight corporations. Employees typically exercise options years before expiration, commonly sacrificing half of the Black-Scholes value. Exercise is strongly associated with recent stock price movements, the market-to-strike ratio, proximity to vesting dates, time to maturity, volatility, and the employee's level within the company. These findings have implications for compensation planners, the FASB as it develops a new accounting standard for options, and financial statement users and preparers who apply and interpret the new FASB standard.
Useful Links
- Leverage the following resources to learn more about equity compensation and the ASC 718 and IFRS 2 standards.
- ASC 718 Standard
- IFRS 2 Standard
- Financial Accounting Standards Board (FASB)
- International Accounting Standards Board (IASB)
- Certified Equity Professional Institute
- National Center For Employee Ownership (NCEO)
- National Association for Stock Plan Professionals (NASPP)
- Financial Executives International (FEI)
Recommended Books
Advanced Topics in Equity Compensation Accounting
By Takis Makridis
In this required text for the CEP, published by the NCEO, author Takis Makridis selects a handful of valuation issues, one reporting issue and a hybrid of the above and subjects them to close scrutiny.
Click here to purchase a copy
