Managerial Gaming of Stock and Option Grants

26 Pages Posted: 17 Jul 2017

See all articles by Yisong S. Tian

Yisong S. Tian

York University - Schulich School of Business

Date Written: August 2017


In this paper, we examine managerial gaming of different types of equity grants, both at the initial award of the equity grants (front‐end gaming) and the unwinding of the equity holdings in the future (back‐end gaming). We find that the potential gains from stock price manipulation vary substantially across different types of equity grants. While traditional stock option grants are less vulnerable to front‐end gaming, they are more vulnerable to back‐end gaming than other types of equity grants (e.g., restricted stock grants). To prevent or discourage managerial gaming, firms should preset all terms of the equity grant in advance and link its future payoff to average stock prices (e.g., by granting Asian stock options).

Keywords: back‐end gaming, equity incentives, executive compensation, front‐end gaming, restricted stock grants, stock option grants, stock price manipulation

JEL Classification: G13, G30, J33, M52

Suggested Citation

Tian, Yisong Sam, Managerial Gaming of Stock and Option Grants (August 2017). Financial Markets, Institutions & Instruments, Vol. 26, Issue 3, pp. 127-152, 2017. Available at SSRN: or

Yisong Sam Tian (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
416-736-2100, ext 77943 (Phone)
416-736-5687 (Fax)

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