IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Firm Volatility and Stock Option Incidence

Author Info

Listed author(s):
  • Campbell, Benjamin A.
Registered author(s):

    Abstract

    In this paper, I present two models that describe the relationship between stock option incidence and stock price volatility. First, I present an industry-clockspeed human resources (HR) model. Firms in industries where products obsolesce quickly will grant stock options to motivate employees to exert high e.ort and shorten the product development cycle, which increases volatility of .rm performance. In the second approach, I present a model of cash-constrained .rms, where .rm stock price volatility is positively related to borrowing costs. If borrowing costs increase with performance volatility and risk, .rms will o.er stock options to conserve cash. Using the IT data, I .nd that option incidence is positively related to .rm volatility, which is consistent with the implications of both models, while the relationship between options incidence and .rm size and wages is more consistent with the Clockspeed-HR model.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.escholarship.org/uc/item/7gt1r0pn.pdf;origin=repeccitec
    Download Restriction: no

    Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt7gt1r0pn.

    as
    in new window

    Length:
    Date of creation: 19 Jun 2003
    Handle: RePEc:cdl:indrel:qt7gt1r0pn
    Contact details of provider: Postal:
    2521 Channing Way # 5555, Berkeley, CA 94720-5555

    Web page: http://www.escholarship.org/repec/iir_iirwps/

    More information through EDIRC

    Keywords: Stock Market; Stock Options;

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Walsh, Frank, 1999. "A Multisector Model of Efficiency Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 351-376, April.
    2. Wadhwani, Sushil B & Wall, Martin, 1991. "A Direct Test of the Efficiency Wage Model Using UK Micro-data," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 529-548, October.
    3. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    5. Garen, John E, 1994. "Executive Compensation and Principal-Agent Theory," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1175-1199, December.
    6. James B. Rebitzer & Lowell J. Taylor, 1991. "A Model of Dual Labor Markets When Product Demand Is Uncertain," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1373-1383.
    7. Dickens, William T & Lang, Kevin, 1985. "A Test of Dual Labor Market Theory," American Economic Review, American Economic Association, vol. 75(4), pages 792-805, September.
    8. Campbell, Benjamin A., 2003. "Local Labor Market Conditions and Stock Options Incidence: A Study of the Information Technology Sector," Institute for Research on Labor and Employment, Working Paper Series qt7266d0q3, Institute of Industrial Relations, UC Berkeley.
    9. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    10. Edward P. Lazear, 1999. "Output-based Pay: Incentives or Sorting?," NBER Working Papers 7419, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    The CitEc project has not yet found citations to this item.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Access and download statistics

    When requesting a correction, please mention this item's handle: RePEc:cdl:indrel:qt7gt1r0pn. 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: (Lisa Schiff)

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.