Private Information in Executives' Option Trades: Evidence from the UK
AbstractThis paper investigates whether UK executives use private information in the trading decisions associated with the exercise of their executive stock options. We find that UK executives' exercise and sell decisions are motivated by their private information but not by their anticipation of future return volatility. These findings appear robust when we control for additional motivating factors that include option moneyness, the previous stock return and the value of the exercise. We argue that the disparity in the informativeness of US and UK executives' trades at exercise is related to important differences in executive remuneration, and in the regulation and taxation of executive stock options.
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Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2008/4.
Length: 45 pages
Date of creation: Feb 2008
Date of revision:
Publication status: Published in Economica , vol. 77 (2010), 751-774
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Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers
More information through EDIRC
Executive remuneration; executive stock options; trade informativeness;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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