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Retention Effects of Employee Stock Options: Evidence from Bunching at Vesting Dates

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  • Qing Gong
  • Hong Zhang
  • Li-An Zhou

Abstract

This paper examines the retention effect of broad-based employee stock options. Leveraging novel employee-level data and semi-random timing of vesting dates, we estimate a bunching model and find an 88%–239% increase in the quitting rate of option owners shortly after vesting. The intensive-margin responses translate to 3–5 months of delayed turnover. The effect is robust, present only among voluntary quitters, and increases with the value of unexercised options. Back-of-the-envelope comparison of benefits and costs (1) shows option owners have superior performance relative to benchmark groups and (2) provides preliminary estimates of the firm’s break-even conditions.

Suggested Citation

  • Qing Gong & Hong Zhang & Li-An Zhou, 2026. "Retention Effects of Employee Stock Options: Evidence from Bunching at Vesting Dates," Economic Development and Cultural Change, University of Chicago Press, vol. 74(3), pages 777-816.
    • Handle: RePEc:ucp:ecdecc:doi:10.1086/737154
    DOI: 10.1086/737154
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