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On the Timing of CEO Stock Option Awards

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  • Erik Lie

    (Henry B. Tippie College of Business, University of Iowa, Iowa City, Iowa 52242-1000)

Abstract

This study documents that the abnormal stock returns are negative before unscheduled executive option awards and positive afterward. The return pattern has intensified over time, suggesting that executives have gradually become more effective at timing awards to their advantage, and possibly explaining why the results in this study differ from those in past studies. Moreover, I document that the predicted returns are abnormally low before the awards and abnormally high afterward. Unless executives possess an extraordinary ability to forecast the future marketwide movements that drive these predicted returns, the results suggest that at least some of the awards are timed retroactively.

Suggested Citation

  • Erik Lie, 2005. "On the Timing of CEO Stock Option Awards," Management Science, INFORMS, vol. 51(5), pages 802-812, May.
    • Handle: RePEc:inm:ormnsc:v:51:y:2005:i:5:p:802-812
    DOI: 10.1287/mnsc.1050.0365
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    References listed on IDEAS

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    Keywords

    CEO stock option awards; timing;

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