ROE as a performance measure in performance-vested stock option contracts in China

Frontiers of Business Research in China

Table 4 Univariate Tests of Determinants of the Use of an ROE Performance Measure

	Full sample (N = 214)		ROE = 1 subsample (N = 187)		ROE = 0 subsample (N = 27)		T test for difference in means	Wilcoxon test for difference in medians
	Mean	Median	Mean	Median	Mean	Median	p value	p value
SIZE	22.05	21.84	22.03	21.82	22.17	22.03	0.58	0.33
COMPLEXITY	0.85	0.69	0.82	0.69	1.06	1.10	0.08	0.07
FCF	−0.02	0.01	−0.02	0.01	−0.02	0.00	0.95	0.74
DEBTPAYMENT	0.02	0.00	0.02	0.00	0.01	0.00	0.26	0.94
DIVIDENDS	0.11	0.10	0.11	0.10	0.10	0.08	0.49	0.23
GROWTH	3.49	2.90	3.55	2.89	3.10	3.07	0.35	0.61
MGRSHARES	0.07	0.00	0.07	0.00	0.07	0.00	0.84	0.91
DUAL	0.32	0.00	0.31	0.00	0.41	0.00	0.29	0.29
MEETING	2.40	2.40	2.41	2.40	2.26	2.20	0.06	0.05
INDDIR	3.22	3.00	3.18	3.00	3.52	3.00	<0.01	<0.01
ETR	0.18	0.17	0.18	0.17	0.21	0.18	0.19	0.82
COVERAGE	2.26	2.49	2.25	2.40	2.36	2.64	0.59	0.58

This table presents descriptive statistics on the determinants of the use of ROE in performance-vested stock option plans. The ROE = 1 (ROE = 0) subsample includes firms with performance-vested stock option plans that are (are not) based on ROE as a performance measure. SIZE is the log of assets. COMPLEXITY is the log of the number of reporting segments. FCF is free cash flow, defined as (operating cash flows − capital expenditure)/total assets. DEBTPAYMENT is interest payments scaled by total assets. MGRSHARES is the percentage of outstanding stock held by top management. DUAL is an indicator variable that equals one if the CEO is also the chairman of the board and zero otherwise. MEETING is defined as the number of board meetings. INDDIR is defined as the percentage of independent directors on the board. ETR is the effective tax rate, defined as income tax expenses divided by pretax income. COVERAGE is defined as the log of the number of analysts following the firm. P values are based on two-tailed tests