The economic determinants of firms issuing employee stock options: Evidence from Taiwan

This paper examines the economic determinants of firms issuing employee stock options (ESOs) for Taiwan listed companies. For the sample of 3,943 firm-year observations over the year 2001 to 2007, probit regression model shows that the companies with higher leverage, higher proportion of independent directors, more investment opportunities, in the "new economy" industries and larger firms tend to issue ESOs. Considering the magnitude of ESO, the results of Tobit model demonstrate that firms with higher leverage has stronger tendency to issue more ESOs. Furthermore, an additional analysis reveals when firms have less free cash flow will tend to choose issuing more ESOs.