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Good Timing: CEO Stock Option Awards and Company News Announcements
Author(s) -
YERMACK DAVID
Publication year - 1997
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1997.tb04809.x
Subject(s) - earnings , insider trading , stock options , insider , stock (firearms) , executive compensation , business , accounting , non qualified stock option , stock price , restricted stock , economics , finance , stock market , corporate governance , political science , law , engineering , mechanical engineering , paleontology , horse , series (stratigraphy) , biology
ABSTRACT This article analyzes the timing of CEO stock option awards, as a method of investigating corporate managers' influence over the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, I find that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies' quarterly earnings announcements are consistent with an interpretation that CEOs receive stock option awards shortly before favorable corporate news. I evaluate and reject several alternative explanations of the results, including insider trading and the manipulation of news announcement dates.