How do Executives Exercise Their Stock Options?

56 Pages Posted: 14 Feb 2009 Last revised: 3 Oct 2019

See all articles by Daniel Klein

Daniel Klein

Klein Q-Fin Ltd.

Ernst G. Maug

University of Mannheim Business School; European Corporate Governance Institute (ECGI)

Date Written: August 26, 2019


We analyze how 14,000 US top executives exercise their stock options. Factors suggested by existing theories have low or moderate explanatory power. Variables that model executives’ motive to diversify fare particularly poorly, whereas variables that capture reference-dependent preference, such as past highs and lows of stock prices, perform better. By contrast, characteristics of option portfolios are of first-order importance and suggest that managers have target ownership levels. Institutional features like vesting restrictions or blackout periods also have a first-order impact. We conclude that executives’ main motivations for exercising stock options early seem to be outside the scope of extant models.

Keywords: Stock options, early exercise decisions, executive compensation

JEL Classification: G30, M52

Suggested Citation

Klein, Daniel and Maug, Ernst G., How do Executives Exercise Their Stock Options? (August 26, 2019). European Corporate Governance Institute - Finance Working Paper No. 284/2010, Available at SSRN:

Daniel Klein

Klein Q-Fin Ltd. ( email )

Great Britain

Ernst G. Maug (Contact Author)

University of Mannheim Business School ( email )

L9, 1-2
Mannheim, 68131
+49 621 181-1952 (Phone)


European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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