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Executive Stock Option Repricing, Internal Governance Mechanisms, and Management Turnover


  • Nagpurnanand R. Prabhala

    () (Robert H. Smith School of Business)

  • Nenmara K. Chiddi Chidambaran

    () (Finance & Economics)


We analyze characteristics of firms that reprice their executive stock options (ESOs). We document that repricings are economically significant compensation events but there is little else unusual about compensation levels or changes in repricers. Cross-sectionally, repricers are rapidly growing firms that experience a deep, sudden shock to growth and profitability. Repricers are likely to be smaller, younger, more concentrated in technology, trade or service industry sectors, and have smaller boards of directors relative to firms that did not reprice ESOs despite similar return shocks. Repricers have abnormally high CEO turnover rates, and do not show low institutional ownership or more diffuse ownership of their equity. Over 40% of repricers do not include the CEO in the list of executives repriced. Collectively, our evidence provides little support for the view that repricing primarily reflects managerial entrenchment or ineffective governance in firms.

Suggested Citation

  • Nagpurnanand R. Prabhala & Nenmara K. Chiddi Chidambaran, 2000. "Executive Stock Option Repricing, Internal Governance Mechanisms, and Management Turnover," Yale School of Management Working Papers ysm153, Yale School of Management.
  • Handle: RePEc:ysm:somwrk:ysm153

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    More about this item


    Executive compensation; repricing;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General


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