On the Use of Option Grants as a Retention Tool

39 Pages Posted: 7 Jan 2020

See all articles by Erik Lie

Erik Lie

University of Iowa - Henry B. Tippie College of Business

Tingting Que

University of Alabama at Huntsville - College of Business

Date Written: December 16, 2019

Abstract

We report that when states adopt a doctrine that reduces the risk that employees transfer to rival firms, affected firms respond by cutting option grants to both executives and rank-and-file (R&F) employees, especially if the firms have high R&D and nearby rivals. The reverse occurs if the states later reject the same doctrine. Our results suggest that firms actively use options to retain employees who are at risk of transferring proprietary intellectual capital to rival firms. The results further suggest that the firms’ decision-makers view the labor markets for both executives and R&F employees to be geographically segmented.

Suggested Citation

Lie, Erik and Que, Tingting, On the Use of Option Grants as a Retention Tool (December 16, 2019). Available at SSRN: https://ssrn.com/abstract=3504794 or http://dx.doi.org/10.2139/ssrn.3504794

Erik Lie (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

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5020 Main Library
Iowa City, IA 52242-1000
United States

Tingting Que

University of Alabama at Huntsville - College of Business ( email )

Huntsville, AL 35899
United States

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