Stock Option Exercise and Gift Exchange Relationships: Evidence for a Large US Company
We investigate gift exchange relationships in real jobs, making use of a field quasi-experiment associated with the exercise of stock options for roughly 4500 managers in a large public company. In this company, option grants are set equally for all employees within occupational categories, and financial markets set the price at which the options are ultimately exercised. We assert that the considerable variation that we observe across employees and over time in profits from those sales is beyond the control of the individual employee and can be thought of as effectively randomized. We also assert that employees perceive the profit they receive from exercising these options at least in part as the equivalent of a gift: Higher profits in turn cause them to reciprocate with better job performance in the subsequent period. We find significant and economically meaningful positive relationships between the variation in profit per share of the options sold and standard measures of subsequent job performance for individual employees. These effects exist in real jobs and persist over long periods, extending previous studies. Non-parametric and parametric fixed effects models, other controls for sample heterogeneity, and alternative specifications address possible concerns about the randomization assumption and associated statistical issues.
|Date of creation:||Feb 2011|
|Date of revision:|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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.:
- Sandra Maximiano & Randolph Sloof & Joep Sonnemans, 2004.
"Gift Exchange in a Multi-worker Firm,"
Tinbergen Institute Discussion Papers
04-100/1, Tinbergen Institute.
- John A. List, 2005.
"The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions,"
NBER Working Papers
11616, National Bureau of Economic Research, Inc.
- John A. List, 2006. "The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 1-37, February.
- John List, 2006. "The behavioralist meets the market: Measuring social preferences and reputation effects in actual transactions," Natural Field Experiments 00300, The Field Experiments Website.
- Ernst Fehr & Lorenz Goette & Christian Zehnder, 2009.
"A Behavioral Account of the Labor Market: The Role of Fairness Concerns,"
Annual Review of Economics,
Annual Reviews, vol. 1(1), pages 355-384, 05.
- Ernst Fehr & Lorenz Goette & Christian Zehnder, 2008. "A behavioral account of the labor market: the role of fairness concerns," IEW - Working Papers 394, Institute for Empirical Research in Economics - University of Zurich.
- Fehr, Ernst & Götte, Lorenz & Zehnder, Christian, 2008. "A Behavioral Account of the Labor Market: The Role of Fairness Concerns," IZA Discussion Papers 3901, Institute for the Study of Labor (IZA).
- Arkes, Hal R. & Joyner, Cynthia A. & Pezzo, Mark V. & Nash, Jane Gradwohl & Siegel-Jacobs, Karen & Stone, Eric, 1994. "The Psychology of Windfall Gains," Organizational Behavior and Human Decision Processes, Elsevier, vol. 59(3), pages 331-347, September.
- Huddart, Steven, 1994. "Employee stock options," Journal of Accounting and Economics, Elsevier, vol. 18(2), pages 207-231, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16814. 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.