The Performance Impacts of Stock Options in Japan

抄録

Japanese companies are increasingly adopting stock options since the amendments in the commercial code of Japan, in 1997.However, there is a lot of speculation about the performance consequences of stock options in the Japanese business environment. We use multiple measures of firm performance to examine the effect of option grants on increasing the net economic value of a firm.We use cross sectional data of 1600 firm-year observations of the electric companies listed on Tokyo Stock Exchange (from 1997 to 2004). The evidence suggests improvements, both in the operating performance and stock market returns, after the announcement of option plans.Overall, Japanese evidence does not accord with the view that managers misuse options to enrich themselves at the cost of intrinsic firm value.