This article presents a field study that examines the subjective value of equity-based compensation and investigates the relationship between attitude toward risk and compensation preferences. The participants in the field survey received equity-based compensation in the past but lack financial education background. We find that the respondents exhibit difficulty in estimating the value of employee stock options, which usually results in a subjective value that is lower than the objective value (calculated using the Black–Scholes model). Additional findings demonstrate the presence of behavioral biases such as priming and mental anchoring. Finally, we document an absence of transitivity in the preferences of 10% of the respondents.
|Number of pages||8|
|Journal||Compensation and benefits review|
|State||Published - 1 Sep 2012|
Bibliographical noteFunding Information:
We thank the Joseph Kasierer Institute for Research in Accounting at Tel Aviv University for its financial support.
© 2013 SAGE Publications.
- employee stock options
- equity-based compensation
- restricted stocks