What question did this study set out to answer?

The study aims to reassess how potentially dilutive securities are treated in earnings per share calculations using modern finance theories.

Dilution of Earnings per Share in an Option Pricing Framework.

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This analysis reconsiders earnings per share dilution impacts using option pricing models, suggesting new insights into securities valuation.

The study aims to reassess how potentially dilutive securities are treated in earnings per share calculations using modern finance theories.
Reevaluation of existing methods for earnings per share calculations.
Utilization of equilibrium pricing models for options and convertible securities.
Application of stochastic models to assess future stock price behaviors.
It is shown that precise predictions about the timing of voluntary conversions or exercises of securities are achievable.
Probabilities of future stock prices enabling conversion or exercise are derived, demonstrating a structured financial framework.
Policy implications arise from the findings regarding securities valuation.

Robert L. Vigeland (1982) studied this question.

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This analysis reconsiders earnings per share dilution impacts using option pricing models, suggesting new insights into securities valuation.