D. Finnerty, John - In: Managerial Finance 40 (2014) 1, pp. 2-32
Purpose – More than 80 percent of S&P 500 firms that issue ESOs use the Black-Scholes-Merton (BSM) model and substitute the estimated average term for the contractual expiration to calculate ESO expense. This simplification systematically overprices ESOs, which worsens as the stock's...
