Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation?

We examine the determinants and consequences of stock option compensation to directors of state-controlled Chinese firms that are incorporated outside China and listed in Hong Kong, referred to as state-controlled Red Chip firms, over the period 1990-2005. We find that state-controlled Red Chip firm...

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Main Authors: Guan, Yuyan, Ke, Bin, Chen, Zhihong
Other Authors: Nanyang Business School
Format: Journal Article
Language:English
Published: 2013
Subjects:
Online Access:https://hdl.handle.net/10356/100562
http://hdl.handle.net/10220/18176
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author Guan, Yuyan
Ke, Bin
Chen, Zhihong
author2 Nanyang Business School
author_facet Nanyang Business School
Guan, Yuyan
Ke, Bin
Chen, Zhihong
author_sort Guan, Yuyan
collection NTU
description We examine the determinants and consequences of stock option compensation to directors of state-controlled Chinese firms that are incorporated outside China and listed in Hong Kong, referred to as state-controlled Red Chip firms, over the period 1990-2005. We find that state-controlled Red Chip firms granted directors a significant number of stock options in response to the demand of foreign investors. However, state-controlled Red Chip firms forced the directors to forfeit a significant percentage of their vested in-the-money stock options due to a conflict between the high-powered stock option compensation and state-controlled Red Chip firms’ unique managerial labor market. We find little evidence that directors’ stock option compensation changed the behavior of state-controlled Red Chip firms. Overall, our results are consistent with the media’s allegation that the stock options granted to directors of many, if not all, state-controlled Red Chip firms are not genuine compensation.
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spelling ntu-10356/1005622023-05-19T06:44:41Z Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation? Guan, Yuyan Ke, Bin Chen, Zhihong Nanyang Business School DRNTU::Business::Accounting We examine the determinants and consequences of stock option compensation to directors of state-controlled Chinese firms that are incorporated outside China and listed in Hong Kong, referred to as state-controlled Red Chip firms, over the period 1990-2005. We find that state-controlled Red Chip firms granted directors a significant number of stock options in response to the demand of foreign investors. However, state-controlled Red Chip firms forced the directors to forfeit a significant percentage of their vested in-the-money stock options due to a conflict between the high-powered stock option compensation and state-controlled Red Chip firms’ unique managerial labor market. We find little evidence that directors’ stock option compensation changed the behavior of state-controlled Red Chip firms. Overall, our results are consistent with the media’s allegation that the stock options granted to directors of many, if not all, state-controlled Red Chip firms are not genuine compensation. 2013-12-09T03:10:21Z 2019-12-06T20:24:29Z 2013-12-09T03:10:21Z 2019-12-06T20:24:29Z 2013 2013 Journal Article Chen, Z., Guan, Y., & Ke, B. (2013). Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation? The accounting review, 88(5), 1547-1574. 0001-4826 https://hdl.handle.net/10356/100562 http://hdl.handle.net/10220/18176 10.2308/accr-50504 en The accounting review © 2013 American Accounting Association. 50 p.
spellingShingle DRNTU::Business::Accounting
Guan, Yuyan
Ke, Bin
Chen, Zhihong
Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation?
title Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation?
title_full Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation?
title_fullStr Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation?
title_full_unstemmed Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation?
title_short Are stock option grants to directors of state-controlled chinese firms listed in Hong Kong genuine compensation?
title_sort are stock option grants to directors of state controlled chinese firms listed in hong kong genuine compensation
topic DRNTU::Business::Accounting
url https://hdl.handle.net/10356/100562
http://hdl.handle.net/10220/18176
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AT chenzhihong arestockoptiongrantstodirectorsofstatecontrolledchinesefirmslistedinhongkonggenuinecompensation