Changes in CEO Stock Option Grants: A Look at the Numbers

54 Pages Posted: 4 May 2013 Last revised: 3 Sep 2018

See all articles by Vasiliki E. Athanasakou

Vasiliki E. Athanasakou

Saint Mary's University, Canada - Sobey School of Business

Daniel Ferreira

London School of Economics - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Lisa Goh

Hang Seng University of Hong Kong - Department of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: August 21, 2018

Abstract

We study changes in the number of CEO stock option grants. Motivated by evidence of rigidity in stock option grants, we first provide a detailed description of the main aggregate trends in CEO stock option grants. We then consider the cross-sectional heterogeneity in option-granting activity and examine observable factors which may lead boards of directors to revise their option grants. We find that CEOs of firms with unusual investment patterns subsequently receive fewer stock options as part of their compensation packages. CEOs who hold exercisable deeply-in-the-money options (overconfident CEOs) also receive fewer stock options in subsequent periods. Our results suggest that boards use evidence of high or low investment to learn about CEO preferences and traits. These insights can inform theoretical discussion on the topic of option granting behavior and, more broadly, on the board’s re-contracting process.

Keywords: stock option grants, corporate investment, CEO overconfidence

JEL Classification: G30, G32, J33, M41, M52

Suggested Citation

Athanasakou, Vasiliki E. and Ferreira, Daniel and Goh, Lisa, Changes in CEO Stock Option Grants: A Look at the Numbers (August 21, 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 360/2013. Available at SSRN: https://ssrn.com/abstract=2260414 or http://dx.doi.org/10.2139/ssrn.2260414

Vasiliki E. Athanasakou

Saint Mary's University, Canada - Sobey School of Business ( email )

Sobey Building 311
923 Robie Street
Halifax, Nova Scotia B3H 3C3
Canada

Daniel Ferreira (Contact Author)

London School of Economics - Department of Finance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
(+44) 20 7955 7544 (Phone)

HOME PAGE: http://personal.lse.ac.uk/FERREIRD/

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Lisa Goh

Hang Seng University of Hong Kong - Department of Accountancy ( email )

Hang Shin Link
Siu Lek Yuen
Shatin, Hong Kong
China

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