CEO Manipulation of Stock-Option Grants: Evidence from Canadian Public Firms

34 Pages Posted: 24 Oct 2009 Last revised: 18 Mar 2010

See all articles by Samir Saadi

Samir Saadi

Smith School of Business

Lamia Chourou

Queen's University

Date Written: October 23, 2009

Abstract

Using a sample of unscheduled stock options granted to CEOs of large Canadian firms, we find reliable evidence of option grants manipulation. Our results show that the introduction of the two-day filing requirement following the Sarbanes-Oxley Act (SOX) has eliminated backdating practice by Canadian firms cross-listed in the U.S. stock market. Further, we find that SOX has altered the way Canadian domestic firms manipulate stock option grants. Most importantly, we find that cross-listed firms are likely to set stock option grants in harmony with the day-of-the-week effect. Our study suggests that Canadian regulators should at least adopt the SEC-initiated change and should also introduce new regulations that enhance the monitoring role of board of directors.

Keywords: Executive stock option grants, backdating, cross-listing

JEL Classification: J22, M52

Suggested Citation

Saadi, Samir and Chourou, Lamia, CEO Manipulation of Stock-Option Grants: Evidence from Canadian Public Firms (October 23, 2009). Paris December 2009 Finance International Meeting. Available at SSRN: https://ssrn.com/abstract=1493204 or http://dx.doi.org/10.2139/ssrn.1493204

Samir Saadi

Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Lamia Chourou (Contact Author)

Queen's University ( email )

Queen's School of Business
Kingston, Kingston K7M9H1
Canada

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