Stock Option Plans for Non-Executive Employees

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

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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. Available at SSRN: https://ssrn.com/abstract=250040

Wayne R. Guay (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
1329 Steinberg-Dietrich Hall
Philadelphia, PA 19104-6365
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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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