Discussion of 'Information Distribution within Firms: Evidence from Stock Option Exercises'

Posted: 18 Jan 2003

See all articles by Ron Kasznik

Ron Kasznik

Stanford Graduate School of Business


The Huddart and Lang (2002) study documents that higher level of employee option exercise during a particular month is associated with lower stock returns in subsequent months, and interprets this finding as evidence that employees exploit private information in their exercise decisions. While the paper extends the insider trading literature that has largely focused on common stock transactions by top executives, a number of inconsistencies with inferences from prior studies remain unresolved. Moreover, the current research methodology does not establish a direct link to the private information that employees supposedly exploit. Establishing a more direct link between exercise decisions and private information is especially warranted here in light of the somewhat surprising finding that exercises by senior employees are no more informative than those by lower rank employees.

Keywords: insider trading, stock option exercise, employee compensation

JEL Classification: M41, G14, J33

Suggested Citation

Kasznik, Ron, Discussion of 'Information Distribution within Firms: Evidence from Stock Option Exercises'. Journal of Accounting and Economics, Vol. 34, Nos. 1-3, pp. 33-41, January 2003. Available at SSRN: https://ssrn.com/abstract=332120

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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