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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27283
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| Title: | Good Timing: CEO Stock Option Awards and Company News Announcements |
| Authors: | Yermack, David |
| Issue Date: | Mar-1995 |
| Series/Report no.: | FIN-94-052 |
| Abstract: | This paper proposes and implements a new method for investigating
whether CEOs influence the terms of their own compensation. I analyze
the dates of 591 stock option awards to CEOs of Fortune 500 companies in
1992 and 1993, finding that the timing of awards coincides with
favorable movements in companies’ stock prices even though the
awards remain secret for many months. Patterns of corporate earnings and
dividend announcements suggest strongly that CEOs receive stock option
awards shortly before favorable corporate news and that awards are
delayed until after the release of adverse news. Analysis of abnormal
volume data does not support the possibility that insider trading based
on knowledge of the option awards can explain the stock price gains. The
findings imply that top mangers can affect their companies’
processes for awarding stock options and exploit this influence in order
to increase compensation. |
| URI: | http://hdl.handle.net/2451/27283 |
| Appears in Collections: | Finance Working Papers
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