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On the Relevance of Employee Stock Option Behavioral Models

Bahaji, Hamza; Casta, Jean-François (2023), On the Relevance of Employee Stock Option Behavioral Models, in David Bourghelle, Pascal Grandin, Fredj Jawadi, Philippe Rozin, Behavioral Finance and Asset Prices: The Influence of Investor's Emotions, Springer International Publishing : Berlin Heidelberg, p. 85-101. 10.1007/978-3-031-24486-5_4

Type
Chapitre d'ouvrage
Date
2023
Book title
Behavioral Finance and Asset Prices: The Influence of Investor's Emotions
Book author
David Bourghelle, Pascal Grandin, Fredj Jawadi, Philippe Rozin
Publisher
Springer International Publishing
Published in
Berlin Heidelberg
ISBN
978-3-031-24485-8;978-3-031-24486-5
Pages
85-101
Publication identifier
Metadata
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Author(s)
Bahaji, Hamza
Dauphine Recherches en Management [DRM]
Casta, Jean-François
Dauphine Recherches en Management [DRM]
Abstract (EN)
The behavioral framework have proven successful in explaining several puzzling aspects of executive stock-based compensation contracts. A recent literature suggests that both the Cumulative Prospect Theory and the Rank Dependent Expected Utility theory lead to better predictions of Employee Stock Options (ESO) exercise decisions. The aim of this chapter is to provide an overview of those behavioral ESO models and discuss their implications to (1) the valuation of ESO; (2) the design of optimal ESO contracts; and (3) the assessment of employee sentiment.
Subjects / Keywords
Stock Options, Exercise Decisions, Rank-Dependent Expected Utility, Prospect Theory, Employee Sentiment.