Do Stock Options Overcome Managerial Risk Aversion? Evidence from Exercises of Executive Stock Options

• 成果类型: Article
• 署名作者: Heron, Randall A.; Lie, Erik
• 署名单位: Indiana University System; IU Kelley School of Business; Indiana University Indianapolis; University of Iowa
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2485
• 发表日期: 2017
• 页码: 3057-3071
• 关键词: finance; Corporate finance; management; Executive compensation

摘要

We report that the probability that executives exercise options early decreases with the volatility of the underlying stock return. We interpret this to mean that executives' subjective option value increases with volatility and that option grants increase executives' risk appetite. Further decomposition reveals that the results are most pronounced for idiosyncratic volatility, consistent with our conjecture that executives believe they can better predict or influence the resolution of idiosyncratic uncertainty than systematic uncertainty and, thus, favor the former.