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http://ssrn.com/abstract=1267393
 
 

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Incentives, Targeting and Firm Performance: An Analysis of Non-Executive Stock Options


Yael V. Hochberg


National Bureau of Economic Research (NBER); Rice University - Jesse H. Jones Graduate School of Business

Laura Anne Lindsey


Arizona State University (ASU) - Finance Department

April 28, 2009

Review of Financial Studies, Forthcoming

Abstract:     
We examine whether options granted to non-executive employees affect firm performance. Using new data on option programs, we explore the link between broad-based option programs, option portfolio implied incentives, and firm operating performance, utilizing an instrumental variables approach to identify causal effects. Firms whose employee option portfolios have higher implied incentives exhibit higher subsequent operating performance. Intuitively, the implied incentive-performance relation is concentrated in firms with fewer employees and in firms with higher growth opportunities. Additionally, the effect is concentrated in firms that grant options broadly to non-executive employees, consistent with theories of cooperation and mutual monitoring among co-workers.

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Date posted: September 15, 2008 ; Last revised: July 19, 2010

Suggested Citation

Hochberg, Yael V. and Lindsey, Laura Anne, Incentives, Targeting and Firm Performance: An Analysis of Non-Executive Stock Options (April 28, 2009). Review of Financial Studies, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1267393 or http://dx.doi.org/10.2139/ssrn.1267393

Contact Information

Yael V. Hochberg (Contact Author)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Rice University - Jesse H. Jones Graduate School of Business ( email )
6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States
Laura Anne Lindsey
Arizona State University (ASU) - Finance Department ( email )
W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
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