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Abstract - Quest for Global Competitiveness - Universidad de Puerto ...

Abstract - Quest for Global Competitiveness - Universidad de Puerto ...

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shares received (restricted or unrestricted) pursuant to each firm’s equitycompensation plan, among others.Research Data and MethodologyThe equity compensation data <strong>for</strong> the Announcing firms was manually obtainedfrom their annual (10-K) reports and/or their proxy statements, if available. Theexpected type of changes to a firm’s Equity compensation plan inclu<strong>de</strong> a changein the type of employees eligible to receive stock option grants, changing thecriteria to become eligible to receive stock options, e.g. per<strong>for</strong>mance-based,replacing stock options <strong>for</strong> some other type of stock award, changing the optionvaluation mo<strong>de</strong>l, and acceleration of vesting, among others. After reading theStock option plans footnote on the financial statements of the Announcing andthe Matching firms, the firms that reported changes were then subdivi<strong>de</strong>d<strong>de</strong>pending on the type of change reported to ascertain the nature and frequencyof such changes.To measure whether the Announcing or the Non-Announcing (Matching) firmsma<strong>de</strong> any changes to their stock option plans required manually collecting thedata from the 2006 Annual Proxy statements (SEC Schedule 14A) and thefootnotes section of their annual audited financial statements (SEC 10-K Report).The year 2006 is used <strong>for</strong> calendar year-reporting firms because the SECestablished that the first quarter of 2006 (March 31) would be the first requiredreporting period to present the expensing of its stock options. For companieswhose fiscal year-end is not a calendar year, the investigation uses the firm’s2007 fiscal year (10-K) report, e.g. 9-30-07. In addition, on July 26, 2006, theSEC also established additional required disclosure requirements related toexecutive compensation. The additional disclosures will help explain to the usersof financial statements the changes ma<strong>de</strong> by firms to their stock option plans andpossibly suggest reasons <strong>for</strong> the shift in their approach to employee (executive)compensation.11

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