Employee Option Exercise and Equity Issuance Motives
54 Pages Posted: 2 Sep 2011 Last revised: 3 Oct 2015
Date Written: October 2, 2015
Abstract
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
Do you have negative results from your research you’d like to share?
Recommended Papers
-
What Do We Know About Capital Structure? Some Evidence from International Data
By Raghuram G. Rajan and Luigi Zingales
-
The Theory and Practice of Corporate Finance: Evidence from the Field
By John R. Graham and Campbell R. Harvey
-
The Theory and Practice of Corporate Finance: The Data
By John R. Graham and Campbell R. Harvey
-
Market Timing and Capital Structure
By Malcolm P. Baker and Jeffrey Wurgler
-
Market Timing and Capital Structure
By Malcolm P. Baker and Jeffrey Wurgler
-
Testing Tradeoff and Pecking Order Predictions About Dividends and Debt
By Eugene F. Fama and Kenneth R. French
-
Testing Static Trade-Off Against Pecking Order Models of Capital Structure
-
Optimal Capital Structure Under Corporate and Personal Taxation
By Harry Deangelo and Ronald W. Masulis