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The Option To Quit: The Effect Of Employee Stock Options On Turnover

Author

Listed:
  • Serdar Aldatmaz
  • Paige Ouimet
  • Edward D Van Wesep

Abstract

We show that in the years following a large broad-based employee stock option (BBSO) grant, employee turnover falls at the granting firm. We find evidence consistent with a causal relation by exploiting unexpected changes in the value of unvested options. A large fraction of the reduction in turnover appears to be temporary with turnover increasing in the 3rd year following the year of the adoption of the BBSO plan. We also find that the effect of BBSO plans is larger at market leaders, identified as firms with high industry-adjusted market-to-book ratios, market share or industry-adjusted profit margins, as measured at the time of the grant.

Suggested Citation

  • Serdar Aldatmaz & Paige Ouimet & Edward D Van Wesep, 2014. "The Option To Quit: The Effect Of Employee Stock Options On Turnover," Working Papers 14-06, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:14-06
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    File URL: https://www2.census.gov/ces/wp/2014/CES-WP-14-06.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jason Allen & James R. Thompson, 2016. "Capital Structure, Pay Structure and Job Termination," Staff Working Papers 16-12, Bank of Canada.
    2. Allen, Jason & Thompson, James R., 2019. "Variable pay: Is it for the worker or the firm?," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 551-566.
    3. Stanton, Christopher T. & Sandvik, Jason & Saouma, Richard & Seegert, Nathan, 2018. "Analyzing the Aftermath of a Compensation Reduction," CEPR Discussion Papers 13242, C.E.P.R. Discussion Papers.

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    Keywords

    Employee stock options; turnover;

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