Stock Option Grants and Managerial Risk Taking: Evidence from Japanese Intraday Stock Return Data

38 Pages Posted: 21 Aug 2011

Date Written: August 20, 2011

Abstract

This paper investigates whether stock option grants increase managerial risk taking in Japan by using intraday stock return data as well as daily stock return data and yearly financial data. As with previous US studies, we find that firms that announce stock option grants experience significantly higher increase in realized stock volatility than matched peers do during 201 days surrounding the announcement day. We also find a significant increase in their leverage during the three years after the event year. Importantly, those companies experience significantly higher increase in realized volatility during a few days surrounding the announcement day which is computed by the intraday stock return. This result provides evidence that stock options give managers an incentive to take risk in a research environment that suffers less from contamination effects and endogeneity problems. However, there is no evidence that the increased managerial risk-taking creates shareholder wealth.

Keywords: Stock option, Risk-taking, Intraday data, Volatility, Leverage

JEL Classification: G14, G32

Suggested Citation

Moriyasu, Hiroshi and Uchida, Konari, Stock Option Grants and Managerial Risk Taking: Evidence from Japanese Intraday Stock Return Data (August 20, 2011). Available at SSRN: https://ssrn.com/abstract=1913454 or http://dx.doi.org/10.2139/ssrn.1913454

Hiroshi Moriyasu

Nagasaki University ( email )

Katafuchi
Nagasaki, 850-8506
Japan

Konari Uchida (Contact Author)

Kyushu University ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan
+81-92-642-2463 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
57
Abstract Views
528
rank
383,497
PlumX Metrics