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Executive stock options, informative stock prices and innovation

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  • Xin Xiang

Abstract

Prior studies have not reasonably explained why executive stock options (ESOs) encourage innovation through vega rather than delta. This study re-examines the relationship among vega, delta and innovation performance when stock prices are informative. The findings indicate that informative stock prices amplify the delta effect on encouraging executives to improve innovation performance but that informative prices alleviate the traditional positive effect of vega on innovation. Moreover, when stock prices are informative, deep-in-the-money options reduce the positive effect of delta on innovation, whereas the state control, independent directors and manager and director shareholding enhance (reduce) the positive effect of delta (vega) on innovation. The results hold after conducting robustness tests.

Suggested Citation

  • Xin Xiang, 2022. "Executive stock options, informative stock prices and innovation," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 6233-6256, December.
    • Handle: RePEc:taf:reroxx:v:35:y:2022:i:1:p:6233-6256
    DOI: 10.1080/1331677X.2022.2048192
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