We study the relation between corporate governance and opportunistic timing of CEO option grants via backdating or otherwise. Our methodology focuses on how grant date prices rank within the price distribution of the grant month. During 1996-2005, about 12% of firms provided one or more lucky grant -- defined as grants given at the lowest price of the month -- due to opportunistic timing. Lucky grants were more likely when the board did not have a majority of independent directors and/or the CEO had longer tenure -- factors associated with increased influence of the CEO on pay-setting. We find no evidence that gains from manipulated grants served as a substitute for compensation paid through other sources; total reported compensation from such sources was higher in firms providing lucky grants. Finally, opportunistic timing has been widespread throughout the economy, with a significant presence in each of the economy's twelve (Fama-French) industries.
|Date of creation:||Dec 2006|
|Date of revision:|
|Publication status:||published as Bebchuk, Lucian, Yaniv Grinstein, and Urs Peyer. “Lucky CEOs and Lucky Directors." Journal of Finance 65, 6 (2010): 2363-2401.|
|Note:||CF LE LS|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
- Holderness, Clifford G. & Sheehan, Dennis P., 1988. "The role of majority shareholders in publicly held corporations : An exploratory analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 317-346, January.
- Aboody, David & Kasznik, Ron, 2000. "CEO stock option awards and the timing of corporate voluntary disclosures," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 73-100, February.
- Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
- Murphy, Kevin J., 2003. "Stock-based pay in new economy firms," Journal of Accounting and Economics, Elsevier, vol. 34(1-3), pages 129-147, January.
- Cotter, James F. & Shivdasani, Anil & Zenner, Marc, 1997. "Do independent directors enhance target shareholder wealth during tender offers?," Journal of Financial Economics, Elsevier, vol. 43(2), pages 195-218, February.
- Del Guercio, Diane & Dann, Larry Y. & Partch, M. Megan, 2003. "Governance and boards of directors in closed-end investment companies," Journal of Financial Economics, Elsevier, vol. 69(1), pages 111-152, July.
- McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
- Chauvin, Keith W. & Shenoy, Catherine, 2001. "Stock price decreases prior to executive stock option grants," Journal of Corporate Finance, Elsevier, vol. 7(1), pages 53-76, March.
- Byrd, John W. & Hickman, Kent A., 1992. "Do outside directors monitor managers? *1: Evidence from tender offer bids," Journal of Financial Economics, Elsevier, vol. 32(2), pages 195-221, October.
- Jarrad Harford & Kai Li, 2007. "Decoupling CEO Wealth and Firm Performance: The Case of Acquiring CEOs," Journal of Finance, American Finance Association, vol. 62(2), pages 917-949, 04.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12771. 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: ()
If references are entirely missing, you can add them using this form.