Executive stock options: a panel data analysis of determinants in Portugal

This study investigates the determinants of stock options grants to CEOs by Portuguese firms from 2003 to 2006. Using a sample of 155 observations, we find that the CEO's equity ownership, liquidity constraints, board composition and firm size significantly increase the probability that firms grant stock options, whereas board size, firm risk and investment opportunities significantly decrease the likelihood of such stock options attribution. Our results contribute to the existing debate on the appropriate compensation contract. In addition, this study provides evidence that agency theory also explains the decisions about stock options grants in countries like Portugal, which presents a corporate governance structure characterised by concentrated firm ownership and a strong bank presence.