Good Timing: CEO Stock Option Awards and Company News Announcements
50 Pages Posted: 11 Nov 2008
Date Written: October 1995
This paper proposes and implements a new method for investigating whether CEOs influence the terms of their own compensation. I analyze the dates of 619 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, finding 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.
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