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Out-of-the-Money CEOs: Private Control Premium and Option Exercises


Vyacheslav Fos


University of Illinois at Urbana-Champaign

Wei Jiang


Columbia Business School - Finance and Economics

February 2015

Columbia Business School Research Paper No. 13-82

Abstract:     
When a proxy contest is looming, the rate at which CEOs exercise options in order to sell (hold) the resulting shares slows down by 80% (accelerates by 60%), consistent with their desire to maintain or strengthen voting rights when facing challenges. Such deviations are closely aligned with features unique to proxy contests, such as the record dates and nomination status; and are more pronounced when the private benefits are higher or when the voting rights are more crucial. The distortions suggest that incumbents value their stocks higher than the market price when the voting rights are valuable for defending control.

Number of Pages in PDF File: 68

Keywords: private benefits of control; proxy contests; insider trading; early option exercise

JEL Classification: G32, G34, G38, J33


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Date posted: November 17, 2013 ; Last revised: March 16, 2015

Suggested Citation

Fos, Vyacheslav and Jiang, Wei, Out-of-the-Money CEOs: Private Control Premium and Option Exercises (February 2015). Columbia Business School Research Paper No. 13-82. Available at SSRN: http://ssrn.com/abstract=2355084 or http://dx.doi.org/10.2139/ssrn.2355084

Contact Information

Vyacheslav Fos (Contact Author)
University of Illinois at Urbana-Champaign ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
(217) 333 5734 (Phone)
HOME PAGE: http://www.business.illinois.edu/facultyprofile/faculty_profile.aspx?ID=13796
Wei Jiang
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

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