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Option Exercise by CEO's:overconfidence vs. market timing

Author

Listed:
  • Sattar A. Mansi

    (University of Texas at San Antonio)

  • Yaxuan Qi

    (University of Texas at San Antonio)

  • John K. Wald

    (University of Texas at San Antonio)

Abstract

We examine the exercising behavior for executive stock option by S&P 500 CEOs from 1994 to 2003. We analyze whether the postponement decisions of CEOs are explained by the competing hypotheses of optimism (overconfidence) or market timing. For CEOs with high levels of option, overconfidence appears to play and important part in the postponement of exercise. CEOs having lower levels of options, however, are influenced by market timing concerns in their exercise decision, with overconfidence playing a role in the postponement decision.

Suggested Citation

  • Sattar A. Mansi & Yaxuan Qi & John K. Wald, 2007. "Option Exercise by CEO's:overconfidence vs. market timing," Working Papers 0005, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0018fin
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    File URL: http://interim.business.utsa.edu/wps/fin/0005FIN-092-2007.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    option exercise; market timing;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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