IDEAS home Printed from https://ideas.repec.org/p/bru/bruedp/03-17.html
   My bibliography  Save this paper

The Information Contained In The Exercise Of Executive Stock Options

Author

Listed:
  • Kyriacos Kyriacou
  • Bryan Mase

Abstract

This paper investigates the use by insiders of private information in their decision to exercise executive stock options. It is the first to categorise the exercise of an executive stock option by the proportion of stock sold at exercise. Consistent with existing research, exercises overall do not yield subsequent abnormal returns. However, we find a marked and significant difference in subsequent performance between exercises categorised as ‘high’ and ‘low’ sale proportion respectively. Therefore, while the exercise decision may appear uninformed, this study demonstrates that executives do use private information in their exercise and corresponding sale decisions. Further, near-the-money exercises produce negative abnormal returns, consistent with such exercises being relatively expensive. These results need to be reflected in the valuation of executive stock options, and hence the compensation executives derive from them.

Suggested Citation

  • Kyriacos Kyriacou & Bryan Mase, 2003. "The Information Contained In The Exercise Of Executive Stock Options," Economics and Finance Discussion Papers 03-17, Economics and Finance Section, School of Social Sciences, Brunel University.
  • Handle: RePEc:bru:bruedp:03-17
    as

    Download full text from publisher

    File URL: http://www.brunel.ac.uk/329/efwps/03-17.pdf
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bru:bruedp:03-17. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John.Hunter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.