Share-Option Based Compensation Expense, Shareholder Returns and Financial Crisis

Alaa Alhaj Ismail; Sami Adwan; John Stittle

doi:10.1016/j.jcae.2018.11.001

Share-Option Based Compensation Expense, Shareholder Returns and Financial Crisis

Alaa Alhaj Ismail
, Sami Adwan
, John Stittle

University of Sussex
University of Essex

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

214 Downloads (Pure)

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.

Original language	English
Pages (from-to)	20-35
Number of pages	16
Journal	Journal of Contemporary Accounting and Economics
Volume	15
Issue number	1
Early online date	5 Nov 2018
DOIs	https://doi.org/10.1016/j.jcae.2018.11.001
Publication status	Published - Apr 2019
Event	Faculty of Business and Law annual Internal Research Conference 2017 - Jaguar Building, Coventry, United Kingdom Duration: 29 Jun 2017 → 30 Jun 2017 https://www.eventsforce.net/cu/frontend/reg/thome.csp?pageID=980928&eventID=3972&traceRedir=2&eventID=3972

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in Contemporary Accounting and Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Contemporary Accounting and Economics, [15], (2018) DOI: 10.1016/j.jcae.2018.11.001

© 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright © and Moral Rights are retained by the author(s) and/ or other copyright owners. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This item cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder(s). The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders.

Keywords

IFRS 2
Share based compensation
financial crisis
large shareholders
financial institutions
Financial institution
And large shareholders
Share-based payment
Financial crisis

ASJC Scopus subject areas

Accounting
Business, Management and Accounting (miscellaneous)

Access to Document

10.1016/j.jcae.2018.11.001

Post-printAccepted author manuscript, 1.27 MBLicence: CC BY-NC-ND

Cite this

@article{5362064aed5642208d551948bb38b48d,

title = "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. ",

keywords = "IFRS 2, Share based compensation, financial crisis, large shareholders, financial institutions, Financial institution, And large shareholders, Share-based payment, Financial crisis",

author = "\{Alhaj Ismail\}, Alaa and Sami Adwan and John Stittle",

note = "NOTICE: this is the author{\textquoteright}s version of a work that was accepted for publication in Contemporary Accounting and Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Contemporary Accounting and Economics, [15], (2018) DOI: 10.1016/j.jcae.2018.11.001 {\textcopyright} 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/ Copyright {\textcopyright} and Moral Rights are retained by the author(s) and/ or other copyright owners. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This item cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder(s). The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders. ; Faculty of Business and Law annual Internal Research Conference 2017 ; Conference date: 29-06-2017 Through 30-06-2017",

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TY - JOUR

T1 - Share-Option Based Compensation Expense, Shareholder Returns and Financial Crisis

AU - Alhaj Ismail, Alaa

AU - Adwan, Sami

AU - Stittle, John

N1 - NOTICE: this is the author’s version of a work that was accepted for publication in Contemporary Accounting and Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Contemporary Accounting and Economics, [15], (2018) DOI: 10.1016/j.jcae.2018.11.001 © 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/ Copyright © and Moral Rights are retained by the author(s) and/ or other copyright owners. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This item cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder(s). The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders.

PY - 2019/4

Y1 - 2019/4

N2 - 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.

AB - 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.

KW - IFRS 2

KW - Share based compensation

KW - financial crisis

KW - large shareholders

KW - financial institutions

KW - Financial institution

KW - And large shareholders

KW - Share-based payment

KW - Financial crisis

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UR - https://www.scopus.com/pages/publications/85057231073

U2 - 10.1016/j.jcae.2018.11.001

DO - 10.1016/j.jcae.2018.11.001

M3 - Article

SN - 1815-5669

VL - 15

SP - 20

EP - 35

JO - Journal of Contemporary Accounting and Economics

JF - Journal of Contemporary Accounting and Economics

IS - 1

T2 - Faculty of Business and Law annual Internal Research Conference 2017

Y2 - 29 June 2017 through 30 June 2017

ER -

Share-Option Based Compensation Expense, Shareholder Returns and Financial Crisis

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

Access to Document

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Cite this