88 Executive Stock Options, Corporate Cash Holdings and M&A Decisions In Table 2, we show the univariate analysis between cash-rich firms and non-cashrich firms. Statistically, cash-rich firms usually grant their mangers ESOs with lower vega and higher delta. However, there is no difference in the managers’ risk incentive (Vegaacquier,t-1) between cash-rich acquirers and non-cash-rich acquirers (0.1347 vs. 0.1267). The tendency of undertaking M&As is similar between cash-rich firms and non-cashrich firms. Meanwhile, the managers in cash-rich firms on average hold higher ownership than those in non-cash-rich firms, indicating cash-rich firms are more likely to be well governed than non-cash-rich firms. These findings are consistent with Harford et al. (2008) that managers in cash-rich firms do not necessarily benefit themselves at the expense of shareholders. While the announcement return (CAR(-2,+2)) shows a positive reaction for both firms, the market response seems weaker in cash-rich firms than in non-cashrich firms (0.002 vs. 0.007), implying investors may still be concerned about the agency problem in cash-rich firms. Overall, this study allows us to understand how managers might enhance the benefits of cash holdings 4. Empirical Results 4.1 Excess Cash Holdings and the ESOs-Induced M&A Decisions Table 3 The Effect of Excess Cash on the ESOs-Induced Corporate M&A Decision Panel A: Probit Model Dep: MAt (1) Full Sample (2) All-Cash Deals (3) Within Industry Sample (4) Within Industry & All-Cash Deals Vegat-1 Deltat-1 Cashricht-1 Vega×Cashrich Delta×Cashrich 0.0693** (2.28) 0.00527 (0.78) -0.0227** (-2.47) 0.0758* (1.89) -0.0103 (-1.13) 0.0392* (1.74) -0.00141 (-0.27) -0.00841 (-1.22) 0.0462 (1.62) -0.000789 (-0.12) 0.0524** (2.23) 0.00996** (1.96) -0.0217*** (-2.95) 0.0606** (1.97) -0.00668 (-0.96) 0.0114 (0.66) 0.00307 (0.84) -0.0118** (-2.30) 0.0498** (2.35) 0.00105 (0.22)
RkJQdWJsaXNoZXIy ODg3MDU=