Is it timing or backdating of option grants?
Using a unique dataset from the Netherlands, we investigate three questions of interest. First, we explore the effects of a rule change in September 2002 on option grant dates. Second, we examine the retroactive backdating of option grant dates. Finally, we look at the timing of option grant dates along with news releases around those dates. The outcome of the analyses shows that there are no significant abnormal cumulative returns in the period before the option grant date. However, we find significant abnormal cumulative returns during a period of 30 trading days thereafter, even for scheduled options granted before September 2002. Furthermore, it appears that earnings news releases around option grant dates are managed. The empirical results provide evidence that the timing of news can be seen as a substitute for both backdating option grants and the timing of the option grant date after September 2002. The paper presents novel findings that option grants are retroactively backdated. The latter outcome is based not only on the effects of the change in legislation, but also on an analysis of the relation between the number of options granted and the difference between the highest annual stock price and the exercise price of the option grants. These findings are robust under different model specifications.
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- Oyer, Paul & Schaefer, Scott, 2005.
"Why do some firms give stock options to all employees?: An empirical examination of alternative theories,"
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- Oyer, Paul & Schaefer, Scott, 2004. "Why Do Some Firms Give Stock Options To All Employees?: An Empirical Examination of Alternative Theories," Research Papers 1772r, Stanford University, Graduate School of Business.
- Paul Oyer & Scott Schaefer, 2004. "Why Do Some Firms Give Stock Options to All Employees?: An Empirical Examination of Alternative Theories," NBER Working Papers 10222, National Bureau of Economic Research, Inc.
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- M. P. Narayanan & H. Nejat Seyhun, 2008. "The Dating Game: Do Managers Designate Option Grant Dates to Increase their Compensation?," Review of Financial Studies, Society for Financial Studies, vol. 21(5), pages 1907-1945, September.
- Baker, Malcolm & Gompers, Paul A, 2003. "The Determinants of Board Structure at the Initial Public Offering," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 569-598, October.
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- Peter Roosenboom & Tjalling van der Goot, 2006. "Broad-based employee stock options grants and IPO firms," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1343-1351.
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