Stock Option Plans for Non-Executive Employees

49 Pages Posted: 8 Dec 2000

See all articles by Wayne R. Guay

Wayne R. Guay

University of Pennsylvania - Accounting Department

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: October 2000

Abstract

We examine determinants of non-executive employee stock options outstanding, grants, and exercises for 756 firms during 1994 to 1997. We find that firms use greater stock option compensation when facing capital requirements and financing constraints. Our results are also consistent with firms using options to attract certain types of employees, provide retention incentives, and create incentives to increase firm value. After controlling for economic determinants and stock returns, option exercises are greater (less) when the firm's stock price hits 52-week highs (lows), which confirms in a broad sample the psychological bias documented by Heath, Huddart, and Lang (1999).

Keywords: Employee stock options, Compensation, Equity incentives

JEL Classification: G32, J33, J41

Suggested Citation

Guay, Wayne R. and Core, John E., Stock Option Plans for Non-Executive Employees (October 2000). Available at SSRN: https://ssrn.com/abstract=249511 or http://dx.doi.org/10.2139/ssrn.249511

Wayne R. Guay (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
1329 Steinberg-Dietrich Hall
Philadelphia, PA 19104-6365
United States
215-898-7775 (Phone)
215-573-2054 (Fax)

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02138
United States

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