Are Stock Option Grants to Directors of State- Controlled Chinese Firms Listed in Hong Kong Genuine Compensation?

• Autores: Chen Zhihong, Guan Yuyan, Ke Bin
• Localización: Accounting review: A quarterly journal of the American Accounting Association, ISSN 0001-4826, Vol. 88, Nº 5, 2013, págs. 1547-1574
• Idioma: inglés
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• Resumen

  • 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 highpowered 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.