Universität zu Köln

Gillenkirch, Robert M., Korn, Olaf and Merz, Alexander (2021). After the Stock Options Boom: Changes in Equity-Based Pay Following the Mandatory Adoption of IFRS 2. Int. J. Account., 56 (2). SINGAPORE: WORLD SCIENTIFIC PUBL CO PTE LTD. ISSN 2213-3933

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Abstract

This paper investigates the economic consequences of the mandatory adoption of International Financial Reporting Standard 2 (hereafter, IFRS 2) on firms' choices between alternative executive compensation instruments. With a unique, hand-collected dataset that contains design elements of stock option plans, we find that the adoption of IFRS 2 affects both the decision to keep or to give up stock options and the choice of alternative equity compensation instruments. In contrast to recent evidence from the United States, we find that the majority of firms replacing stock options by other equity instruments switched to performance shares, not to restricted stock. Our dataset allows us to relate firms' reactions to IFRS 2 to the three major rationales explaining stock option compensation practice, namely, optimal contracting, managerial rent extraction, and perceived cost. Our results suggest that all three rationales contribute to explaining changes in compensation design because firms with sophisticated option plans tend to keep their options, whereas design decisions by firms abandoning options are related to a lack of shareholder power.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Gillenkirch, Robert M. UNSPECIFIED UNSPECIFIED UNSPECIFIED Korn, Olaf UNSPECIFIED UNSPECIFIED UNSPECIFIED Merz, Alexander UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-581250
DOI:	10.1142/S1094406021500062
Journal or Publication Title:	Int. J. Account.
Volume:	56
Number:	2
Date:	2021
Publisher:	WORLD SCIENTIFIC PUBL CO PTE LTD
Place of Publication:	SINGAPORE
ISSN:	2213-3933
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language ECONOMIC CONSEQUENCES; CORPORATE GOVERNANCE; EXECUTIVE-COMPENSATION; MANAGERIAL POWER; INFORMATION ASYMMETRY; ACCOUNTING STANDARDS; CEO COMPENSATION; MARKET VALUATION; BOARD SIZE; PERFORMANCE Multiple languages Business, Finance Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/58125