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CEO opportunism?: Option grants and stock trades around stock splits

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  • Devos, Erik
  • Elliott, William B.
  • Warr, Richard S.

Abstract

Decades of research confirm that, on average, stock split announcements generate positive abnormal returns. In our sample, 80% of CEO stock option grants are timed to occur on or before the split announcement date. With the average market-adjusted announcement return of 3.1%, awarding the grant before the split announcement results in an average gain per CEO-grant of $451,748. We find additional evidence consistent with timing of CEO stock trading around the split announcement. In the case of CEO stock sales, about two-thirds occur after the split announcement, resulting in an average gain of $345,613.

Suggested Citation

  • Devos, Erik & Elliott, William B. & Warr, Richard S., 2015. "CEO opportunism?: Option grants and stock trades around stock splits," Journal of Accounting and Economics, Elsevier, vol. 60(1), pages 18-35.
  • Handle: RePEc:eee:jaecon:v:60:y:2015:i:1:p:18-35
    DOI: 10.1016/j.jacceco.2015.02.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Managerial incentives; Executive compensation; Stock splits;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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