The effects of endowment and loss aversion in managerial stock option valuation

• 成果类型: Article
• 署名作者: Devers, Cynthia E.; Wiseman, Robert M.; Holmes, R. Michael, Jr.
• 署名单位: University of Wisconsin System; University of Wisconsin Madison; Texas A&M University System; Texas A&M University College Station; Mays Business School; Michigan State University
• 刊物名称: ACADEMY OF MANAGEMENT JOURNAL
• ISSN/ISSBN: 0001-4273
• 发表日期: 2007
• 页码: 191-208
• 关键词: RISKY DECISION-MAKING; experimental tests; BEHAVIOR; COMPENSATION; CHOICE; pay; willingness; disposition; preference; regression

摘要

Assuming a positive influence of stock price volatility on stock option value, incentive alignment proponents argue that stock option compensation encourages managerial risk seeking and, thus, aligns managers' and shareholders' risk preferences. Our findings show that stock option holders overvalue unexercisable options relative to options being offered and to normative (e.g., Black-Scholes) valuations. Further, the influence of stock price volatility on holders' subjective valuations depends on stock price trend. In sum, results suggest that during stock option valuation, managers draw on heuristics that financial options theory and models fail to capture. We discuss implications for compensation design and research.