Executive Stock Options Compensation: An Empirical Analysis Of Determinants In Portugal

Abstract

This study investigates the determinants of stock options attribution. The study hy-pothesizes that the equity held by managers, the board composition, the board size, the dividend policy, the leverage, the firm risk, the liquidity constraints, the firm size and the firm performance are related to the firm’s attribution of stock options. Using a lon-gitudinal data on 40 listed firms from Portugal for the period 2003 to 2006, the study finds that the probability of granting stock options increases with the firms’ size and managerial ownership. This probability also increases when the board is composed of mostly non-executive directors and when firms show levels of risk. Additionally, results suggest a non-linear negative relationship between board size and stock options attribution.

Keywords: Agency Theory; Incentives; Stock Options.