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Changes in CEO stock option grants: A look at the numbers

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  • Athanasakou, Vasiliki
  • Ferreira, Daniel
  • Goh, Lisa

Abstract

We study changes in the number of CEO stock option grants. Despite some evidence of short-term rigidity, the number of options granted changes frequently over time. CEOs of firms with unusual investment patterns subsequently receive fewer stock options as part of their compensation packages. CEOs who hold exercisable deeply-in-the-money options (overconfident CEOs) also receive fewer stock options in subsequent periods. Our results show that past CEO behavior predicts stock option grants. These insights can inform theoretical discussion on option-granting behavior and, more broadly, on the board's re-contracting process.

Suggested Citation

  • Athanasakou, Vasiliki & Ferreira, Daniel & Goh, Lisa, 2022. "Changes in CEO stock option grants: A look at the numbers," Journal of Corporate Finance, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:corfin:v:75:y:2022:i:c:s0929119922000694
    DOI: 10.1016/j.jcorpfin.2022.102226
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    More about this item

    Keywords

    Stock option grants; Stock option rigidity; Corporate investment; CEO overconfidence;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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