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.
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