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The Information Contained in the Exercise of Executive Stock Options


  • Kyriacos Kyriacou

    (Brunel University)

  • Bryan Mase

    (Brunel University)


This paper investigates whether insiders use private information in their decision to exercise executive stock options. Consistent with existing research, exercises overall do not yield subsequent abnormal returns. Categorising exercises by the proportion of stock sold at exercise yields a marked and significant difference in subsequent performance between those accompanied by a ‘high’ and ‘low’ sale proportion respectively. Further, near-the-money exercises produce negative abnormal returns, consistent with such exercises being expensive. The disparity in US and UK executives’ exercise behaviour may be related to the extent to which executive remuneration is linked to shareholder wealth, highlighting the difficulties associated with designing effective remuneration packages for executives

Suggested Citation

  • Kyriacos Kyriacou & Bryan Mase, 2006. "The Information Contained in the Exercise of Executive Stock Options," Computing in Economics and Finance 2006 193, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:193

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    More about this item


    executive stock options; insider trading; event studies;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading


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