Non-executive Employee Stock Options and Product Quality: Evidence from Product Recalls

Prof. Rui GE, Associate Professor, Shenzhen University & Audencia Business School

Date:         26 October 2022 (Wednesday)
Time:         3:00pm – 4:00pm
Venue:      Online via Zoom
Host:          Prof. Feng TANG, Assistant Professor of Accounting
Online registration: https://umac.au1.qualtrics.com/jfe/form/SV_4SLaSegWkVly38a

Registration deadline: 24 October 2022


Using product recalls to proxy for low product quality, we find that product quality increases with the stock options granted to non-executive employees. The effect of nonexecutive employee stock options on product quality is economically meaningful and robust across alternative measures of product quality and option compensation for nonexecutive employees. The findings also hold after controlling for potential endogenous effects. We further find that the impact of non-executive employee stock options on product quality is attenuated for firms with high capital intensity, and is amplified for firms with high labor mobility. Furthermore, we show that non-executive employee stock options lead to higher likelihood of a timely remediation of product defects. Overall, our findings suggest that non-executive employee stock options play an important role in enhancing product quality.


Prof. Rui GE is an Associate Professor and the Associate Dean (Research) in Shenzhen Audencia Fintech Institute (Shenzhen University WeBank Institute of Fintech), Shenzhen University & Audencia Business School. He received his Ph.D from Hong Kong University of Science and Technology. His research areas are Production of Financial Information, Corporate Tax Avoidance and Corporate Finance. His works have appeared in major journals including The Accounting Review, Review of Accounting Studies, Accounting Horizons, Journal of Contemporary Accounting and Economics and China Journal of Accounting Studies. He is the editorial board member of China Journal of Accounting Studies. Also, he is the journal reviewer of Contemporary Accounting Research and several other journals.

All are welcome!