Stock option plans and the risk of expropriation. Empirical evidence from the Italian setting

The paper presents the findings of a research on the design of stock option plans and the risk of expropriation of minority shareholders among Italian companies with concentrated ownership. In such a context, managers are more likely to extract rents through excess compensation and the design of SOPs could acerbate the so-called agency conflict type II (controlling shareholder versus minorities). We empirically assess whether the SOPs with certain characteristics (short vesting period, absence of lock-up period, lack of indexation mechanisms) are associated with the extraction of private benefits at the expense of minority shareholders. We find that the presence of a vesting period of more than three years significantly and positively affects the risk of expropriation. Our results may provide further insights for all listed companies having a concentrated ownership, and a high risk of expropriation of minority shareholders.