Changes in CEO Stock Option Grants: A Look at the Numbers
52 Pages Posted: 26 Sep 2017
Date Written: September 2017
We study changes in CEO stock option grants. Unlike most of the literature, we focus on the number rather than the value of options granted. 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. We find that CEOs who either overinvest or underinvest 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 findings provide insights into the dynamics of CEO compensation contracts.
Keywords: CEO overconfidence, corporate investment, stock option grants
JEL Classification: G30, G32, J33, M41, M52
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