Koshelev E.V.Lobachevsky State University of Nizhny Novgorod – National Research University, Nizhny Novgorod, Russian Federation ekoshelev@yandex.ru
Importance Motivation for company development is an important characteristic of top management. Most of modern researchers believe that to make an unbiased appraisal of top management performance, the results of their work should be assessed by the market. Objectives The study aims to assess the motivation of top managers by means of warrants. It is obvious that the motivation should have a certain price for the company, which needs to be preliminarily estimated. The stock price is adjusted for expected dilution, which is a consequence of warrant exercise. Methods The Black-Scholes model provides a conservative option value, therefore, it is often used to evaluate European options. However, for a more realistic picture of corporate operations, the model with dividends for European warrants should be used. Results We recommend to take the adjustment of the fair price of shares, which is obtained after the first specification of the fair price of the warrant. In this case, the price of motivation of top managers by means of warrants is calculated by multiplying the decrease in value of shares by the number of outstanding shares. Conclusions The obtained price of motivation of top managers should be compared to the current gain in the market value of the corporation for the planned period till the date of warrant exercise. If the current gain in the market value is expected to be higher than the price of motivation of top managers, the warrant-based motivation is considered as justified.
Keywords: motivation, top managers, warrants, Black-Scholes model, dividend
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