Measuring Equity Issuance
Stephen B. McKeon
University of Oregon - Department of Finance
February 15, 2015
Cash proceeds from employees' exercise of options are substantial, totaling over $1 trillion in aggregate since 1985. Although reported as equity proceeds, option exercises are unlikely to inform us about how contemporaneous conditions influence managers' motives to issue equity, because the option grant decision is typically made years prior to the share issuance. Because equity issuance data available through Compustat and CRSP pool all issuance mechanisms into a single figure, option proceeds are commingled with IPOs, SEOs, and private placements. I demonstrate that a filter for pooled data effectively identifies the firm-initiated component, leading to sharper inferences in empirical tests.
Number of Pages in PDF File: 55
Keywords: employee stock options, financing decisions, capital structure, cash holdings
JEL Classification: G14, G32
Date posted: September 2, 2011 ; Last revised: February 16, 2015
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