Summary
This paper compares the performance of 229 `New Economy’ firms offering broad-based stock options to that of their non-stock option counterparts. A simple comparison of these firms reveals that the former have higher shareholder returns, Tobin’s q and new knowledge generation. Multivariate analysis using panel data also suggests that the adoption of a stock option plan results in higher levels of value added per employee. However, we do not find evidence that these plans result in superior growth in Tobin’s q or new knowledge generation.