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Type: Journal article
Title: Evidence on exercise pricing in CEO option grants in two countries
Author: Canil, J.
Rosser, B.
Citation: Annals of Finance, 2015; 11(3-4):383-410
Publisher: Springer
Issue Date: 2015
ISSN: 1614-2446
Statement of
Jean M. Canil, Bruce A. Rosser
Abstract: This paper examines the relationship between exercise prices, grant size and CEO risk aversion employing a data set of Australian option grants characterized by exercise prices that vary relative to the stock price. We argue that Australian exercise price and grant size decisions provide an appropriate framework for evaluating the consequences of the U.S. practice of granting at-the-money options. Using a 3SLS estimation, we find that exercise prices are positive in grant size when internalizing CEO risk aversion but less so for the U.S. relative to Australia.We find also that CEO risk aversion is negatively related to both exercise prices and grant size in Australia but negatively related only to exercise prices in the U.S. A positive relation found between CEO risk aversion and grant size in the U.S. implies that risk aversion is addressed with larger grant sizes to compensate for fixed exercise prices.
Keywords: Executive compensation; exercise prices; grant size; option grants; risk aversion; moneyness
Rights: © Springer-Verlag Berlin Heidelberg 2015
RMID: 0030031221
DOI: 10.1007/s10436-015-0262-4
Appears in Collections:Business School publications

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