Download or read book An Examination of Executive Stock Option Repricing written by Mary Ellen Carter and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we examine factors that explain firms' decisions to reprice stock options. Comparing a sample of firms that reprice executive stock options in 1998 to a control sample of firms with out-of-the-money options in 1998 that choose not to reprice, we find that young, high technology firms are more likely to reprice than other firms. In addition, we find that the likelihood of repricing increases as options become more out-of-the-money, and that firms reprice in response to poor firm-specific performance, not poor industry performance. These results are not consistent with claims that firms reprice to insulate management from uncontrollable industry effects. However, we find no relation between the likelihood of repricing and conflicts of interest between executives and shareholders, suggesting that repricing is not related to agency problems. The results are consistent with the often stated motivation that firms must reprice out-of-the-money options to restore the incentive effects of those options and to prevent management in competitive labor markets from going to work for other firms.
Download or read book Executive Stock Option Repricing Internal Governance Mechanisms and Management Turnover written by N.K. Chidambaran and published by . This book was released on 2010 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze characteristics of firms that reprice their executive stock options (ESOs). We document that repricings are economically significant compensation events but there is little else unusual about compensation levels or changes in repricers. Cross-sectionally, repricers are rapidly growing firms that experience a deep, sudden shock to growth and profitability. Repricers are likely to be smaller, younger, more concentrated in technology, trade or service industry sectors, and have smaller boards of directors relative to firms that did not reprice ESOs despite similar return shocks. Repricers have abnormally high CEO turnover rates, and do not show low institutional ownership or more diffuse ownership of their equity. Over 40% of repricers do not include the CEO in the list of executives repriced. Collectively, our evidence provides little support for the view that repricing primarily reflects managerial entrenchment or ineffective governance in firms.
Download or read book Costs and Incentive Effects of Stock Option Repricing written by Ulrike Neubauer and published by Peter Lang Publishing. This book was released on 2004 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: Does repricing of executive stock options, i.e. the practice of lowering the exercise price when options are out-of-the-money unfairly reward managers for poor performance and thereby undermine incentives set by the compensation contract? In a study that compares the pay package containing repriced option with an otherwise adjusted package it is shown that repricing is not more expensive to shareholders than otherwise adjusting non-option compensation components. However, the package containing repriced options provides significantly stronger incentives. Furthermore, a policy that constrains the board of directors from repricing does not have significant effects on shareholders' returns."
Download or read book Executive Stock Option Repricing written by Christopher M. Cassidy and published by . This book was released on 2002 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Repricing of Executive Stock Options written by Don M. Chance and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the incidence of corporations lowering the exercise prices of their executive stock options. These options can be viewed as a combination of a down-and-out call option and a down-and-in call option with the exercise price equal to the barrier. Using barrier option pricing theory, we find that at a minimum this features adds 7-10 percent to the value of the options on the grant date. We also examine the market, industry and firm-specific performance of a sample of 37 firms and 53 reset events. The period covered was 250 days before and after the day on which the firm reset the exercise prices of its executive stock options. The evidence strongly supports the conclusion that resetting the exercise price follows a period of poor firm-specific performance. The magnitude of the reduction in the exercise price was positively related to the firm's stock price performance and using a value- weighted market portfolio, it was negatively related to the market's performance. No evidence supports the contention that lowering the exercise price brings an end to the firm's problems and leads to an increase in shareholder wealth. Though the direct dollar impact at the time of the reset is relatively small to the shareholders, it is not insignificant to management. Allowing for the possibility of resetting after a stock price decline can create a perverse incentive under certain circumstances for managers to deliberately drive the stock price down further. In addition management has a greater incentive to engage in high risk projects than it would have with ordinary non- esettable options. These incentives and our results that the resets are indeed done, sometimes repeatedly, following poor firm-specific performance suggest that resetting is not in the best interests of shareholders, who should certainly question this practice.
Download or read book Rescission and Repricing of Executive Stock Options Repricing Alternatives Optimal Repricing Policy and Early Exercise PHD written by Twan-Shan Yang and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Managerial Risk Taking Incentives and Executive Stock Option Repricing written by Daniel A. Rogers and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the relation between managerial incentives from holdings of company stock and options and stock option repricing. Because options provide incentives to increase both risk and stock price, firms must realize that as options go underwater, executives might face incentives to invest in risky, negative NPV projects. Repricing may alleviate such incentives. I examine repricing activity by firms in the U.S. gaming industry and find that risk-taking incentives from options are positively related to the incidence of executive option repricing. The results support the hypothesis that repricing assists firms in alleviating excessive risk-taking incentives of senior management.
Download or read book Altering the Terms of Executive Stock Options written by Menachem Brenner and published by . This book was released on 1998 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Repricing of Executive Stock Options written by Jerry T. Yang and published by . This book was released on 2014 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the ex-ante optimality of repricing of executive stock options while considering the tax effects of new accounting rules associated with traditional repricing. Although there has been a body of empirical literature on repricing, the optimality of repricing after considering the economic impact of changing accounting rules has not been addressed in an ex-ante contracting setting. We find that traditional repricing loses its ex-ante dominance over the do-nothing strategy after we incorporate the tax effects of new accounting rules. The theoretical predictions of our paper shed light on this controversial practice and lay a foundation for evaluating repricing alternatives.
Download or read book Executive Stock Options and Stock Appreciation Rights written by Herbert Kraus and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Don't even consider preparing a stock option plan for your company or clients without this unique one-volume reference book. Executive Stock Options and Stock Appreciation Rights will guide you through such vital topics as: types of stock options available, including nonqualified and incentive stock options; stock appreciation rights; SEC disclosure and registration requirements; liabilities under Section 16(b) and Rule 16b-3; stock option repricing; Section 423 stock purchase plans; federal tax law including Section 409A; state corporation and blue sky laws; accounting practice under revised Statement of Financial Accounting Standards No. 123; timing of stock option grants; requirements of the stock exchanges; IRS rulings affecting gifts of compensatory stock options; self-repricing "look-back" options; federal tax implications of dividing employee stock options in marital property settlements; and granting of stock options to dual or "leased" employees. You'll learn about the advantages and disadvantages for both the company and the optionee. Plus, you'll find numerous sample forms and documents, including stock option plans for public and closely held companies, proxy statements, and submissions to stockholders disclosing existing stock option arrangements.
Download or read book Does Option Repricing Retain Executives and Improve Future Performance written by Sandra Renfro Callaghan and published by . This book was released on 2003 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We directly test the assertion that executive stock option repricing leads to increased management retention and/or improved future firm performance. Using a sample of 201 repricing events and a non-repricing control sample, we examine executive retention in the four years following repricing. We find that CEO retention is significantly greater for repricing firms relative to non-repricing firms for three years following the repricing date, and non-CEO executive retention is significantly greater for two years. We also find that, in the pre-repricing period, repricing firms exhibit significant positive industry-adjusted firm growth, stock, and operating performance. However, we find mixed results in the post-repricing period. We find that repricing firms exhibit significant negative industry-adjusted firm growth, and significant positive industry-adjusted stock and accounting performance.
Download or read book Managerial Risk Taking Incentives and Executive Stock Option Repricing written by Daniel A. Rogers and published by . This book was released on 2005 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, I examine the relation between managerial incentives from holdings of company stock and options and stock option repricing. Specifically, given that options provide both incentives to increase risk as well as stock price, firms must be cognizant that executives may increasingly face incentives to invest in risky, negative NPV projects, as options go underwater. Repricing may serve as a mechanism to alleviate such incentives. The study examines repricing activity by firms in the U.S. gaming industry during 1993-1998. I find that, in both firm-level and executive-level analyses, risk-taking incentives from options are positively related to the incidence of executive option repricing. The results are supportive of the hypothesis that repricing assists firms in alleviating excessive risk-taking incentives of senior management.
Download or read book Repricing Stock Options written by James Reda and published by . This book was released on 2014 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: Due to recent drops in the stock market, many U.S. publicly traded companies are considering repricing stock options for their executives. Companies must balance the need to attract and retain executives with shareholder interests, since repricings effectively separate the interests of management and the interest of shareholders. Studies have shown little support for the traditional justifications for rich executive stock awards, such as a weak correlation between executive ownership and stock performance. Since stock market conditions have changed, the opportunity arises to re-structure executive compensation in line with expected stock market returns and company needs.
Download or read book Option Repricing and Incentive Realignment written by Jeffrey L. Coles and published by . This book was released on 2014 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence that firms reprice out-of-the-money executive stock options in order to realign managerial incentives. A sharp decline in stock price, by reducing the sensitivity of executive pay to firm performance (delta) and, in many cases, increasing sensitivity of executive pay to stock-return volatility (vega), can cause managerial incentives to depart from optimal or target levels. Our results suggest that increasing delta does not appear to be a strong motivation for repricing. Rather, we find strong evidence that firms reprice executive options to reduce risk-taking incentives (vega) toward the target level.
Download or read book The Effect of Stock Option Repricing on Employee Turnover written by Mary Ellen Carter and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether repricing underwater stock options reduces both executive and overall employee turnover using a sample of firms that reprice stock options in 1998 and a sample of firms with underwater stock options that choose not to reprice. We find little evidence that repricing affects executive turnover. However, using forfeited stock options to proxy for overall employee turnover, we find that employee turnover in 1999 is negatively related to the 1998 repricing, suggesting that repricing helps to prevent turnover due to underwater options. We find no evidence that the relation between turnover and repricing differs between high technology and nonhigh technology firms.
Download or read book The Timing of Option Repricing written by Sandra Renfro Callaghan and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether firms time the stock option repricing to coincide with favorable movements in the company's stock price. For a sample of 166 firms that repriced executive stock options during the period 1992 through 1997, we show that, in general, stock price rises sharply on the repricing date and continues to increase for the next twenty days. In addition, repricing often occurs just following the release of bad news or just prior to good news. Since no information about the stock option repricing is released around the repricing date, the evidence above is suggestive of management timing the option repricing date to precede other good news events that are announced.
Download or read book The Complete Guide to Employee Stock Options written by Frederick D. Lipman and published by Prima Lifestyles. This book was released on 2001 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerous private and public companies offer stock option plans every year to motivate, retain, and reward employees. But implementing the right stock option plan can be a complex and daunting undertaking, without the proper guidance.The Complete Guide to Employee Stock Optionsunravels the mystery of creating a meaningful equity compensation plan for employees that is favorable for the business. Author and attorney Frederick D. Lipman describes in complete detail the legal, operational, and motivational aspects of developing a stock option program, whether it's for the new start-up looking to attract top talent or the venerable company looking for ways to reward its best performing employees. Readers will discover how to: * Understand the pros and cons of different option plans* Implement the right plan to meet the company's future plans* Motivate key employees with equity compensation* Minimize the risk of losing equity in a volatile market* And much moreThis book also includes useful information for employees who want to understand what their stock options mean and how to maximize their profitability. Complete wi
