IMPACT OF DIVIDEND-PROTECTED EMPLOYEE STOCK OPTIONS ON PAYOUT POLICIES: EVIDENCE FROM TAIWAN

.  This study used a sample of 1035 Taiwanese firms to examine the impact of dividend protected employee stock options on stock repurchase and cash dividend policies from 2000 to 2005. This study finds a positive relationship between cash dividends and executive options, implying that executives hol...

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Bibliographic Details
Published in:Pacific economic review (Oxford, England) England), 2008-10, Vol.13 (4), p.431-452
Main Authors: Wu, Ming-Cheng, Kao, Erin H. C., Fung, Hung-Gay
Format: Article
Language:English
Subjects:
Cash flow
Dividend policy
Dividends
Economic theory
Employee benefits
G35
M52
Securities buybacks
Stock options
Studies
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Summary:.  This study used a sample of 1035 Taiwanese firms to examine the impact of dividend protected employee stock options on stock repurchase and cash dividend policies from 2000 to 2005. This study finds a positive relationship between cash dividends and executive options, implying that executives holding stock options might prefer to distribute cash dividends to boost the stock price. This result, unlike in earlier studies, arises from the dividend protected characteristic of Taiwanese employee stock options. Finally, free cash flow, firm profitability, level of debt, investment opportunities and firm size are found to considerably influence payout decisions.
ISSN:1361-374X
1468-0106
DOI:10.1111/j.1468-0106.2008.00411.x