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http://hdl.handle.net/2451/26723
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| Title: | ON RESCISSIONS IN EXECUTIVE STOCK OPTIONS |
| Authors: | Brenner, Menachem
Sundaram, Rangarajan
Yermack, David |
| Issue Date: | 15-Apr-2002 |
| Series/Report no.: | S-CG-02-05 |
| Abstract: | We study executive stock options that permit the option holder to
rescind an exercise decision, returning the shares acquired to the
company and obtaining a refund of the exercise price. Rescissions
occurred at a number of U.S. companies in 2000 after the large decline
in internet stocks, and have been widely condemned as a weakening of
incentives. To the contrary, we find that in many situations rescindable
options dominate ordinary options by delivering greater value and
stronger incentives to the employee at a lower cost to the firm. The
attractiveness of rescindable options arises as a consequence of the
income tax treatment of most executive stock options in the U.S. |
| URI: | http://hdl.handle.net/2451/26723 |
| Appears in Collections: | Corporate Governance
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