Repricing Alternatives, Optimal Repricing Policy, and Early Exercise of Executive Stock Options

Yang, Jerry T.

doi:10.2139/ssrn.321541

Cited by 2 publications

(1 citation statement)

References 29 publications

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“…Other papers in the literature have examined alternative responses by firms to underwater options by looking at the compensation changes undertaken as a response to underwater options (Yang and Carleton (2003), Balachandran, Carter, and Lynch (2004), Chidambaran and Prabhala (2008), and Hall and Knox (2004)). In this study, I adopt a different approach by contrasting repricing firms with firms that pursue different alternatives in understanding the factors that drive the probability of stock option repricing relative to the other three alternatives.…”

Section: Figurementioning

confidence: 99%

Stock Option Repricing and Its Alternatives: An Empirical Examination

Kalpathy¹

2009

J. Financ. Quant. Anal.

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In this paper I examine the likelihood of CEO stock option repricing and its alternatives: namely, option grant, stock grant, and “do nothing.” Multinomial logit results suggest that firms reprice options to increase sensitivity of pay to stock price and to temper down sensitivity of pay to volatility. Moreover, repricing firms are younger and more concentrated in industries where human capital is important. Finally, I find no evidence that internal governance or executive conflicts of interest are relevant in explaining repricing. My results indicate that repricing is motivated by incentive alignment and retention, and not by agency cost considerations.

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Section: Figurementioning

confidence: 99%