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Good Timing: CEO Stock Option Awards and Company News Announcements

David Yermack
New York University - Stern School of Business

J. OF FINANCE, Vol. 50 No. 2, June 1997

Abstract:
This paper analyzes the timing of CEO stock option awards, as a method of investigating corporate managers' influence over the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, I find that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies' quarterly earnings announcements are consistent with an interpretation that CEOs receive stock option awards shortly before favorable corporate news. I evaluate and reject several alternative explanations of the results, including insider trading and the manipulation of news announcement dates.

JEL Classifications: G30

Accepted Paper Series

Date posted: March 17, 1997 ; Last revised: January 02, 1998

Suggested Citation

Yermack, David, Good Timing: CEO Stock Option Awards and Company News Announcements. J. OF FINANCE, Vol. 50 No. 2, June 1997. Available at SSRN: http://ssrn.com/abstract=8189

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David Yermack (Contact Author)

New York University - Stern School of Business ( email )

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