On the Timing of CEO Stock Option Awards

Lie, Erik

doi:10.1287/mnsc.1050.0365

Cited by 462 publications

(312 citation statements)

References 9 publications

Supporting

Mentioning

289

Contrasting

Unclassified

Order By: Relevance

“…We first look at whether the deferrals were backdated. Following the approach in Lie (2005) and Heron and Lie (2007), we first examine the reporting gaps between the "trandate" (the date of the transaction) and "secdate" (the date in which the director's Form 4 was submitted to the SEC) fields in Thompson Insider. Untabulated statistics indicate that the average (median) number of trading days between the two dates is 29 (2).…”

Section: Opportunistic Timingmentioning

confidence: 99%

Abnormal Accruals in Newly Public Companies: Opportunistic Misreporting or Economic Activity?

2016

View full text Add to dashboard Cite

Newly public companies tend to exhibit abnormally high accruals in the year of their initial public offering (IPO). Although the prevailing view in the literature is that these accruals are caused by opportunistic misreporting, we show that these accruals do not appear to benefit managers and instead result from the normal economic activity of newly public companies. In particular, and in contrast to the notion that managers benefit from inflating accruals through an inflated issue price, inflated post-IPO equity values, and increased insider trading profits, we find no evidence of a relation between abnormal accruals and these outcomes. Instead, consistent with these accruals resulting from normal economic activity, we find that these accruals are attributable to the investment of IPO proceeds in working capital and that controlling for the amount of IPO proceeds invested in working capital produces a more powerful accrual-based measure of misreporting. AbstractThis study investigates the determinants and trading performance of outside directors' equity deferrals, which represent the choice to convert part or all of their annual cash compensation into deferred company stock. Using a large sample of S&P1500 firms that allowed directors to defer their cash fees into equity between 1999 and 2009, we find significant associations between equity deferral choices and specific features of the director compensation plans, proxies for directors' outside wealth diversification, and future firm stock market performance. Trading performance analyses indicate that outside directors earn substantial abnormal returns from their deferrals, with a significant proportion of the deferral transactions occurring during blackout periods. These results are consistent with companies structuring director equity deferral plans to circumvent SEC Rule 10b-5's trading restrictions.Key words: outside directors; deferred compensation; insider trading; SEC Rule 10b-5 plans.a We are grateful to Mary Barth (the department editor), an anonymous associate editor, and three anonymous referees for very constructive comments. We also appreciate helpful suggestions from

show abstract

Section: Opportunistic Timingmentioning

confidence: 99%

Abnormal Accruals in Newly Public Companies: Opportunistic Misreporting or Economic Activity?

2016

View full text Add to dashboard Cite

show abstract

“…Evidence for the backdating of executive stock options developed by Lie (2005) and Heron and Lie (2007) rests upon three empirical patterns: (1) option awards that occur in regular calendar patterns ("scheduled awards"), such as the same week every year, are not as favorably timed as those that occur at unexpected times ("unscheduled awards"); (2) the favorable timing of option awards tends to improve with the amount of time that an executive takes to disclose the award to the SEC; and (3) awards tend to be timed not only with the firm's abnormal movement relative to the market, but also with movements in the underlying market index. I explore each of these patterns with respect to CEOs' family foundation stock gifts, estimating regression models with the dependent variables equal to the cumulative raw stock return and cumulative net-of-market stock return, both measured over the 20 days following each stock gift by a CEO.…”

Section: Why Are Ceos' Stock Gifts Followed By Negative Abnormal Rmentioning

confidence: 99%

Deductio’ ad absurdum: CEOs donating their own stock to their own family foundations

Yermack

2009

Journal of Financial Economics

View full text Add to dashboard Cite

I study large charitable stock gifts by Chairmen and CEOs of public companies. These gifts, which are not subject to insider trading law, often occur just before sharp declines in their companies' share prices. This timing is more pronounced when executives donate their own shares to their own family foundations. Evidence related to reporting delays and seasonal patterns suggests that some CEOs backdate stock gifts to increase personal income tax benefits. CEOs' family foundations hold donated stock for long periods rather than diversifying, permitting CEOs to continue voting the shares.I appreciate helpful comments from

show abstract

“…Additional concerns are the size of the pay-performance relation (e.g. Jensen and Murphy, 1990;Hall and Liebman, 1998), contractual puzzles such as the resetting of under-water options and the lack of indexing at the industry level (Hall and Murphy, 2003), and more recently the options backdating scandal (Lie, 2005). However, there is also a substantial body of research that supports the contrarian view that CEO pay levels have little to do with weak boards (e.g.…”

Section: Introductionmentioning

confidence: 99%

Strong Managers, Weak Boards?

Adams

Ferreira

2009

CESifo Economic Studies

View full text Add to dashboard Cite

Many governance reform proposals are based on the view that boards have been too friendly to executives, for example, by awarding them excessive pay. Although boards are often on friendly terms with executives, it is less clear that they have systematically failed to function in the interests of shareholders. Understanding board monitoring requires a theory of boards that takes into account how …rms provide incentives for their CEOs through other means. We develop a model in which a CEO's ownership stake and private bene…ts have opposite e¤ects on his willingness to share private information with an independent board of directors. To encourage the CEO to communicate, the board may optimally commit to a low monitoring intensity when either CEO ownership is low or private bene…ts are high. Our model suggests that the existing cross-section evidence on the correlation between board composition and CEO ownership and tenure needs reevaluation. Using a new proxy for board monitoring, we provide new evidence that this cross-sectional correlation appears to be non-monotonic, with board independence …rst decreasing and then increasing in CEO ownership and tenure. We discuss the implications of our model for the design and evaluation of governance structures.

show abstract

On the Timing of CEO Stock Option Awards

Cited by 462 publications

References 9 publications

Abnormal Accruals in Newly Public Companies: Opportunistic Misreporting or Economic Activity?

Abnormal Accruals in Newly Public Companies: Opportunistic Misreporting or Economic Activity?

Deductio’ ad absurdum: CEOs donating their own stock to their own family foundations

Strong Managers, Weak Boards?

Contact Info

Product

Resources

About