What Determines Stock Option Contract Design?

This paper analyzes factors driving the design of stock option plans for Finnish firms. We examine determinants of the scope of plans, exercise price, target group, and dividend protection. The scope is found to be negatively related to Tobin’s Q and positively related to proxies for monitoring costs. The scope is also greater in broad-based plans, and in plans with dividend protection. Prior stock return is found to be negatively related to the size of the premium (out-of-the-moneyness), whereas dividend protection increases the premium. The results also suggest that investment intensity, cash flow, and monitoring costs are associated with the likelihood of granting premium (out-of-the-money) stock options. Furthermore, the likelihood of granting broad-based plans is increasing in institutional ownership and cash flow constraints, and decreasing in firm size. Broad-based plans are also more likely among firms in growth industries. We find support that the likelihood of dividend protection is decreasing in foreign ownership. In addition, firms paying zero-dividends are less likely to include dividend protection, whereas higher unsystematic risk is associated with a greater likelihood of including dividend protection.

Stock Option Compensation in Finland: An Analysis of Economic Determinants, Contracting Frequency, and Design

This paper addresses several questions in the compensation literature by examining stock option compensation practices of Finnish firms. First, the results indicate that principal-agent theory succeeds quite well in predicting the use of stock options. Proxies for monitoring costs, growth opportunities, ownership structure, and risk are found to determine the use of incentives consistent with theory. Furthermore, the paper examines whether determinants of stock options targeted to top management differ from determinants of broad-based stock option plans. Some evidence is found that factors driving these two types of incentives differ. Second, the results reveal that systematic risk significantly increases the likelihood that firms adopt stock option plans, whereas total firm risk and unsystematic risk do not seem to affect this decision. Third, the results show that growth opportunities are related to time-dimensional contracting frequency, consistent with the argument that incentive levels deviate more rapidly from optimum in firms with high growth opportunities. Finally, the results suggest that vesting schedules are decreasing in financial leverage, and that contract maturity is decreasing in firm focus. In addition, both vesting schedules and contract maturity tend to be longer in firms involving state ownership.

Yhteinen kaupunki, eriytyvät kaupunginosat? : Kantaväestön ja maahanmuuttajataustaisten asukkaiden alueellinen eriytyminen ja muuttoliike pääkaupunkiseudulla

This thesis critically examines the patterns and processes of ethnic residential segregation in the Helsinki Metropolitan Area (HMA). These phenomena are examined in two main ways: a) between the native and immigrant populations and b) the extent to which different immigrant groups are sharing the same neighbourhoods. The main aim of the study is to test the extent to which the theoretical claims of the selective migration processes can explain the development of ethnic residential segregation in HMA. The data is mixed: it consists of neighbourhood-level statistics related to the migration, demography and housing stock. The selective migration flows are analysed within and between neighbourhood-types, defined on the basis of the percentages of foreign-language-speakers. For contextual purposes, the study also includes fifteen expert interviews who work within the housing sector. Firstly, the results show that, from the early 2000s the patterns of ethnic residential segregation have strengthened while the differences between neighbourhoods have grown. On a more general level the HMA can be divided into two main areas: some eastern and north-eastern neighbourhoods that have experienced the rise of immigrant concentrations and; the northern, north-western and southern parts of the HMA, where the number and percentages of immigrants have remained relatively low. However, within the eastern and north-eastern neighbourhoods there are also discernable internal differences that reflect the income levels of the inhabitants and the type of housing stock. The results also show that, the existing immigrant concentrations are ethnically and culturally mixed and thus qualitatively different from China town and Little-Italy enclaves of single groups of immigrants. Secondly, the results show that there are clear signs of the selective migration processes of the native and immigrant populations which have resulted in the discernable development of ethnic residential segregation. Migration flows of the native population have gravitated towards neighbourhoods, where the percentage of immigrants is below the HMA average. This has resulted in significant migration losses for neighbourhoods with established and developing concentrations of immigrants. Meanwhile, migration of immigrants has been drawn to neighbourhoods where their percentages are above the HMA average. However, the results also point to clear differences in the migration and spatial patterns of different immigrant groups. The spatial selectivity of migration is, thus, more prominent amongst the native population than when compared with immigrants. Overall, the results indicate that the reproduction of the selective migration flows of the native and immigrant populations will largely determine HMA s future development of ethnic residential segregation.