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Private Information in Executives' Option Trades: Evidence from the UK

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Listed:
  • Kyriacou, Kyriacos
  • Luintel, Kul B

    (Cardiff Business School)

  • Mase, Bryan

Abstract

This paper investigates whether UK executives use private information in the trading decisions associated with the exercise of their executive stock options. We find that UK executives' exercise and sell decisions are motivated by their private information but not by their anticipation of future return volatility. These findings appear robust when we control for additional motivating factors that include option moneyness, the previous stock return and the value of the exercise. We argue that the disparity in the informativeness of US and UK executives' trades at exercise is related to important differences in executive remuneration, and in the regulation and taxation of executive stock options.

Suggested Citation

  • Kyriacou, Kyriacos & Luintel, Kul B & Mase, Bryan, 2008. "Private Information in Executives' Option Trades: Evidence from the UK," Cardiff Economics Working Papers E2008/4, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2008/4
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    References listed on IDEAS

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    More about this item

    Keywords

    Executive remuneration; executive stock options; trade informativeness;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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