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Executive Stock Option Plans and Corporate Dividend Policy


  • Lambert, Richard A.
  • Lanen, William N.
  • Larcker, David F.


This paper examines the association between the initial adoption of stock options for senior-level executives and subsequent changes in corporate dividend policy. The primary research hypothesis is that the addition of a stock option to a manager's compensation package provides an incentive for the executive to reduce corporate dividends. This hypothesis follows from the observation that executive stock options are generally not “dividend protected.” The results suggest that dividends are reduced relative to expected dividends. We interpret these results as suggesting that the personal incentives of executives can affect certain aspects of the observed corporate dividend policy.

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  • Lambert, Richard A. & Lanen, William N. & Larcker, David F., 1989. "Executive Stock Option Plans and Corporate Dividend Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(04), pages 409-425, December.
  • Handle: RePEc:cup:jfinqa:v:24:y:1989:i:04:p:409-425_01

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    References listed on IDEAS

    1. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    2. Harris, Milton & Raviv, Artur, 1988. "Corporate control contests and capital structure," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 55-86, January.
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