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UNDERWATER STOCK OPTIONS AND VOLUNTARY EXECUTIVE TURNOVER: A MULTIDISCIPLINARY PERSPECTIVE INTEGRATING BEHAVIORAL AND ECONOMIC THEORIES
Author(s) -
DUNFORD BENJAMIN B.,
OLER DEREK K.,
BOUDREAU JOHN W.
Publication year - 2008
Publication title -
personnel psychology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.076
H-Index - 142
eISSN - 1744-6570
pISSN - 0031-5826
DOI - 10.1111/j.1744-6570.2008.00128.x
Subject(s) - turnover , valuation (finance) , perspective (graphical) , multidisciplinary approach , underwater , economics , psychology , actuarial science , business , finance , management , computer science , social science , artificial intelligence , sociology , oceanography , geology
In a study of top U.S. executives between 1996 and 2006, we examined the impact of underwater stock options on voluntary turnover. Financial and economic logic suggests that underwater options may carry a positive valuation based on Black–Scholes (BS) pricing, even when the current market price is below the exercise price. However, a variety of psychological and behavioral theories suggest that underwater option portfolios may motivate voluntary turnover to a greater extent than what can be captured by Black–Scholes valuation. Findings supported these perspectives, as underwater options were associated with voluntary executive turnover, after controlling for the BS value of the options and other factors. Moreover, we found evidence that voluntary turnover dynamics differed substantially between CEOs and non‐CEOs.