CEO Stock Option Awards and the Timing of Corporate Voluntary Disclosures

Posted: 26 Nov 2000

See all articles by David Aboody

David Aboody

University of California, Los Angeles (UCLA) - Accounting Area

Ron Kasznik

Stanford Graduate School of Business

Abstract

We investigate whether CEOs manage the timing of their voluntary disclosures around scheduled stock option awards. Because stock options generally are awarded with a fixed exercise price equal to the stock price on the award date, we conjecture that CEOs manage investors' expectations around award dates by delaying good news and rushing forward bad news. For a sample of 2,039 CEO option awards by 572 firms with fixed award schedules, we document changes in share prices and analyst earnings forecasts around award dates that are consistent with our conjecture. We also provide more direct evidence based on management earnings forecasts issued prior to award dates. Because our sample comprises scheduled awards, our findings cannot be attributed to opportunistic timing of the award. Overall, our findings provide evidence that CEOs of firms with scheduled awards make opportunistic voluntary disclosures that maximize their stock option compensation. Our study contributes to the literature on executive compensation by providing evidence consistent with CEOs managing investors' expectations around option award dates. Our study also is relevant to the literature on corporate voluntary disclosure, in that we find that top executives have compensation-related incentives to delay good news and rush forward bad news.

Keywords: CEO stock option awards; Voluntary disclosure

JEL Classification: M41, M45, G29, G12, J33, D82

Suggested Citation

Aboody, David and Kasznik, Ron, CEO Stock Option Awards and the Timing of Corporate Voluntary Disclosures. Journal of Accounting & Economics, Vol 29, No 1, February 2000. Available at SSRN: https://ssrn.com/abstract=242430

David Aboody

University of California, Los Angeles (UCLA) - Accounting Area ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-825-3393 (Phone)
310-267-2193 (Fax)

Ron Kasznik (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-725-9740 (Phone)
650-725-6152 (Fax)

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