Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Finance

No 2003-2: The Value and Incentives of Option-based Compensation in Danish Listed Companies

Ken L. Bechmann () and Peter Løchte Jørgensen ()
Additional contact information
Ken L. Bechmann: Department of Finance, Copenhagen Business School, Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark
Peter Løchte Jørgensen: Department of Management, Postal: University of Aarhus, University Park 322, DK-2000 Frederiksberg DK-8000 Århus C

Abstract: Over the last decade the Danish corporate environment has experienced a significant increase in the use of option-based compensation (OBC). This and many other facts are documented in the present paper which provides the first insights into the characteristics of the option and warrant contracts issued by the complete sample of Danish companies listed on the Copenhagen Stock Exchange. A newly constructed database containing all publicly available information on details of Danish OBC contracts allows us to present, for example, results regarding contract values at an aggregated as well as at firm, personnel group, and individual level. The paper also contains a section which discusses and presents evidence on the incentive effects provided by the option-based compensation contracts adopted by Danish listed companies.

Keywords: Option-based compensation; executive pay; disclosure requirements; valuation; incentives

JEL-codes: G13; G30; J33

30 pages, September 1, 2003

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