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|Title:||CEO stock options: The impact of pre-awarded CEO stock ownership and plan and award conditions|
|Citation:||Proceedings of the 2006 FMA Annual Meeting, 2006 / Emery, D.R. (ed./s), pp.www1-www20|
|Part of:||Proceedings of 2006 FMA Annual Meeting|
|Conference Name:||Financial Management Association International Meeting (11 Oct 2006 : Salt Lake City, USA)|
|Jean M. Canil and Bruce A. Rosser|
|Abstract:||This paper provides fresh evidence on CEO stock option awards. We identify several contracting conditions that are applied at either plan adoption or a subsequent award. We show empirically that option awards cannot be evaluated without controlling for CEO pre-award stock ownership. Although options potentially augment CEO incentive, they may not when the stock position is large relative to the award size. We also find that option grants are most successful from a shareholder perspective when awards occur within the top quartile of awarded options/pre-award stock, particularly when the award is made at a discount to market in tandem with vesting requirements. Empirical analysis of CEO stock option awards requires more complete specification of contracting variables than generally exhibited in the extant empirical literature. Of the contracting conditions studied, those having the most important incentive and hence wealth consequences are stock dividend protection, vesting requirements, award discounts/premiums and term to expiry.|
|Appears in Collections:||Business School publications|
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