Premium
What drives the dating game of executive options exercise? Evidence from Taiwan
Author(s) -
Wu MingCheng,
Fung HungGay,
Huang YiTing
Publication year - 2012
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2011.00406.x
Subject(s) - stock options , incentive , business , executive compensation , equity (law) , suspect , stock (firearms) , accounting , agency cost , finance , economics , microeconomics , corporate governance , shareholder , psychology , mechanical engineering , political science , law , engineering , criminology
Examining Taiwanese firms from 2002 to 2008, this paper investigates the motivations behind backdating the exercising of executive stock options. The probability of suspect exercises (backdating) is positively related to the firm’s stock return, the value of the option, tax savings, institutional ownership and the extent of CEO equity ownership and negatively related to firm‐specific risk and the use of Big Four accounting firms. Tax incentives motivate executives to backdate the exercise date, implying that the greater the potential for larger tax savings, the greater the likelihood of backdating. Backdating usually occurs in firms that have heavy ownership by the CEO, have more claims to executive stock options and are not family‐run, confirming the presence of the agency cost problem.