On the optimality of resetting executive stock options

• 成果类型: Article
• 署名作者: Acharya, VV; John, K; Sundaram, RK
• 署名单位: New York University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(00)00051-9
• 发表日期: 2000
• 页码: 65-101
• 关键词: ceo compensation; Executive stock options; repricing; contract renegotiation; managerial incentives

摘要

The practice of resetting strike prices on underwater executive stock options has drawn criticism for weakening managerial incentives. Our model shows that although the anticipation of resetting can negatively affect initial incentives, resetting can still be an important, value-enhancing aspect of compensation contracts, even from an ex-ante standpoint. In fact, we find that some resetting is almost always optimal. The relative advantages of resetting diminish with greater ability of managers to influence the resetting process, greater relative importance of external factors on stock performance, and lower costs of replacing incumbent managers. (C) 2000 Elsevier Science S.A. All rights reserved. JEL classification: G32; J33; L14.