Employee Option Exercise and Equity Issuance Motives

54 Pages Posted: 2 Sep 2011 Last revised: 3 Oct 2015

See all articles by Stephen B. McKeon

Stephen B. McKeon

University of Oregon - Department of Finance

Date Written: October 2, 2015


Cash proceeds from employees' exercise of options are substantial, totaling over $1 trillion in aggregate since 1985. Option exercises are unlikely to inform us about how contemporaneous conditions influence managers' motives to issue, because the option grant is jointly a compensation decision, and is typically made years prior to the share issuance. Using a simple filter to identify the firm-initiated component in pooled data, I find that cash savings is less prevalent than reported in previous studies and that a sizable portion of the leverage effect from market timing is driven by the actions of employees.

Keywords: employee stock options, financing decisions, capital structure, cash holdings

JEL Classification: G14, G32

Suggested Citation

McKeon, Stephen B., Employee Option Exercise and Equity Issuance Motives (October 2, 2015). Available at SSRN: https://ssrn.com/abstract=1920985 or http://dx.doi.org/10.2139/ssrn.1920985

Stephen B. McKeon (Contact Author)

University of Oregon - Department of Finance ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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