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.

Nutritional evaluation of silage made from the toxic weed parthenium hysterophorus in animals

After ensilation, the toxic Compositae weed Parthenium hysterophorus was devoid of the toxic principle parthenin. Laboratory-scale ensilation indicated that no parthenin was detectable after 5 wk of anaerobic fermentation. For animal feeding studies, silage was made on a large scale from Parthenium mixed with maize or from Parthenium alone. Crossbred bull and buffalo bull calves were fed diets containing the silages, or control diet without silage, for 12 wk. The animals consumed both silages with relish, and body weight gains of silage-fed calves did not differ from those of the controls. The digestibilities of dry matter, fibre and nitrogen-free extract were greater with the control diet, but the biological value of proteins tended to be greater with the silage-containing diets. Haematological studies indicated no significant differences between experimental and control groups in selected parameters, except for a reduction in blood urea nitrogen in the animals fed silage. The possible causes for these biochemical alterations are discussed. Since the nutritive value of Parthenium silage compares favourably with the standard diet, and Parthenium seeds collected from the silage did not germinate, we suggest that ensilation can be used as an additional method in the containment and eradication of these plants, which grow wild in India.

Effects of 'sinking in' and 'piling up' on estimating the contact area under load in indentation

The phenomena of the 'piling up' and 'sinking-in' of surface profiles in conical indentation in elastic-plastic solids with work hardening are studied using dimensional and finite-element analysis. The degree of sinking in and piling up is shown to depend on the ratio of the initial yield strength Y to Young's modulus E and on the work-hardening exponent n. The widely used procedure proposed by Oliver and Pharr for estimating contact depth is then evaluated systematically. By comparing the contact depth obtained directly from finite-element calculations with that obtained from the initial unloading slope using the Oliver-Pharr procedure, the applicability of the procedure is discussed.

Pulse vs. Optimal Stationary Fishing: The Northern Stock of Hake

Pulse fishing may be a global optimal strategy in multicohort fisheries. In this article we compare the pulse fishing solutions obtained by using global numerical methods with the analytical stationary optimal solution. This allows us to quantify the potential benefits associated with the use of periodic fishing in the Northern Stock of hake. Results show that: first, management plans based exclusively on traditional reference targets as Fmsy may drive fishery economic results far from the optimal; second, global optimal solutions would imply, in a cyclical manner, the closure of the fishery for some periods and third, second best stationary policies with stable employment only reduce optimal present value of discounted profit in a 2%.

The Importance of Stock Market Returns in Estimated Monetary Policy Rules: a Structural Approach

This paper estimates a standard version of the New Keynesian Monetary (NKM) model augmented with financial variables in order to analyze the relative importance of stock market returns and term spread in the estimated U.S. monetary policy rule. The estimation procedure implemented is a classical structural method based on the indirect inference principle. The empirical results show that the Fed seems to respond to the macroeconomic outlook and to the stock market return but does not seem to respond to the term spread. Moreover, policy inertia and persistent policy shocks are also significant features of the estimated policy rule.