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Neighborhood matters: The impact of location on broad based stock option plans

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  • Kedia, Simi
  • Rajgopal, Shiva
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    Abstract

    We find that fixed effects related to the location of firms' headquarters explain variation in broad based option grants after controlling for industry effects and firm characteristics traditionally known to affect option granting. Location matters because of local labor market conditions and social interaction with neighboring firms. Broad based option grants are higher: (i) when a firm's stock prices co-move more with stock prices of other firms located in that Metropolitan Statistical Area (MSA); (ii) in states that are less likely to enforce non-compete agreements; and (iii) in MSAs where employees prefer options because stocks there experience abnormally high returns.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 92 (2009)
    Issue (Month): 1 (April)
    Pages: 109-127

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    Handle: RePEc:eee:jfinec:v:92:y:2009:i:1:p:109-127

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Geography Stock options Location Employee compensation Retention;

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    Cited by:
    1. Christopher A. Parsons & Johan Sulaeman & Sheridan Titman, 2014. "The Geography of Financial Misconduct," NBER Working Papers 20347, National Bureau of Economic Research, Inc.
    2. Wolfgang Bessler & Christoph Becker & Daniil Wagner, 2009. "The Design and Success of Stock Options Plans for New Economy Firms in Germany," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 12(4), pages 1-34 , Spring.
    3. Francis, Bill & Hasan, Iftekhar & John, Kose & Waisman , Maya, 2012. "Urban agglomeration and CEO compensation," Research Discussion Papers 17/2012, Bank of Finland.
    4. Larcker, David F. & So, Eric C. & Wang, Charles C.Y., 2013. "Boardroom centrality and firm performance," Journal of Accounting and Economics, Elsevier, vol. 55(2), pages 225-250.
    5. Serdar Aldatmaz & Paige Ouimet & Edward D Van Wesep, 2014. "The Option To Quit: The Effect Of Employee Stock Options On Turnover," Working Papers 14-06, Center for Economic Studies, U.S. Census Bureau.
    6. Kumar, Alok & Page, Jeremy K. & Spalt, Oliver G., 2011. "Religious beliefs, gambling attitudes, and financial market outcomes," Journal of Financial Economics, Elsevier, Elsevier, vol. 102(3), pages 671-708.
    7. Peter Cziraki & Moqi Xu, 2014. "Ceo Job Security And Risk-Taking," FMG Discussion Papers, Financial Markets Group dp729, Financial Markets Group.

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