Good Timing: CEO Stock Option Awards and Company News Announcements

J. OF FINANCE, Vol. 50 No. 2, June 1997

Posted: 17 Mar 1997

See all articles by David Yermack

David Yermack

New York University (NYU) - Stern School of Business

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Abstract

This paper analyzes the timing of CEO stock option awards, as a method of investigating corporate managers' influence over the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, I find that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies' quarterly earnings announcements are consistent with an interpretation that CEOs receive stock option awards shortly before favorable corporate news. I evaluate and reject several alternative explanations of the results, including insider trading and the manipulation of news announcement dates.

JEL Classification: G30

Suggested Citation

Yermack, David, Good Timing: CEO Stock Option Awards and Company News Announcements. J. OF FINANCE, Vol. 50 No. 2, June 1997. Available at SSRN: https://ssrn.com/abstract=8189

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