Dipartimento di Economia e Crenos

   

Prossima iniziativa:

A. Melis, S. Carta, S. Gaia, Università di Cagliari

 

 

Salvo diversa indicazione, tutti i seminari avranno luogo il venerdì alle ore 12:00 presso l’Aula Magna della Facoltà di Economia in Viale Sant’Ignazio 74.

La serie di seminari è coordinata dal Prof. B. Moro e dal Prof. P. Mattana.

 

Andrea Melis, Silvia Carta e Silvia Gaia

 

 

Manuscript Type: Empirical.

Research Question/Issue: This study explores why stock options for director remuneration are used in blockholder-dominated listed firms.

Research Findings/Insights: Using a unique hand-collected dataset comprising stock options granted by Italian non-financial listed firms between 2004 and 2006, this paper sheds light on why blockholder-dominated listed firms granted stock options to  their directors. Empirical evidence suggests that their diffusion seems better explainable by rent-extraction theory than by  optimal contracting theory. Furthermore, our results suggest that corporate governance devices such as the independence of remuneration committee and minority shareholders’  representation in corporate boards seem to have a positive influence on the characteristics of stock option plans.

Theoretical/Academic Implications: This study extends knowledge about the use of stock options for director remuneration outside Anglo-American widely-held listed firms. We found that the use of stock options for director remuneration seems to be the outcome of an agency problem, rather than its solution. Rent-extraction theory provides a more powerful explanation to the use of stock options for director remuneration than optimal contracting theory. Corporate governance mechanisms that allow to limit the blockholder’s power are likely to influence the granting of SOPs explainable by optimal contracting theory.

Practitioner/Policy Implications: This study provides insights to policy-makers on director remuneration. Codes of best practices are recommended to stress the importance of stock options’ design, the role of remuneration committees and minority shareholders’ appointees in corporate boards. Tax law should give no favourable treatment to stock options that are not explainable by optimal contracting theory.

 

·         Andrea Melis is Associate professor at the University of Cagliari.

·         Silvia Carta is PhD student at the University of Cagliari.