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