Repricing Stock Options
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| Author | : Ulrike Neubauer |
| Publisher | : Peter Lang Publishing |
| Total Pages | : 244 |
| Release | : 2004 |
| Genre | : Business & Economics |
| ISBN | : |
Does repricing of executive stock options, i.e. the practice of lowering the exercise price when options are out-of-the-money unfairly reward managers for poor performance and thereby undermine incentives set by the compensation contract? In a study that compares the pay package containing repriced option with an otherwise adjusted package it is shown that repricing is not more expensive to shareholders than otherwise adjusting non-option compensation components. However, the package containing repriced options provides significantly stronger incentives. Furthermore, a policy that constrains the board of directors from repricing does not have significant effects on shareholders' returns."
| Author | : Colorado Bar Association |
| Publisher | : |
| Total Pages | : |
| Release | : 2002 |
| Genre | : Employee stock options |
| ISBN | : |
| Author | : Mary Ellen Carter |
| Publisher | : |
| Total Pages | : |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
We examine whether repricing underwater stock options reduces both executive and overall employee turnover using a sample of firms that reprice stock options in 1998 and a sample of firms with underwater stock options that choose not to reprice. We find little evidence that repricing affects executive turnover. However, using forfeited stock options to proxy for overall employee turnover, we find that employee turnover in 1999 is negatively related to the 1998 repricing, suggesting that repricing helps to prevent turnover due to underwater options. We find no evidence that the relation between turnover and repricing differs between high technology and nonhigh technology firms.
| Author | : Kwai Sun Leung |
| Publisher | : |
| Total Pages | : 23 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
Repricing of an employee stock option refers to the practice of lowering the strike price and /or extending the maturity date of a previously granted employee stock option. Normally, firms reprice after a period of significant stock price decline that renders the employee stock options deeply out-of-the-money. By modeling various repricing mechanisms based on some form of Brownian functional of the stock price process, we investigate the impact of the embedded repricing flexibility on the market value of the employee stock options. We manage to derive analytic representation of the price functions of the repriceable options. We also construct the lattice tree type option valuation algorithms by applying the forward shooting grid technique to incorporate the path dependent feature of the Brownian functional in the repriceable option models. Our calculations show that the repricing flexibility may have varying degrees of impact on the option values and their comparative statics. The option delta (option vega) values of the repriceable options are seen to be lower (higher) than those of the vanilla options.
| Author | : Liu Zheng |
| Publisher | : |
| Total Pages | : 128 |
| Release | : 2003 |
| Genre | : |
| ISBN | : |
| Author | : Sandra Renfro Callaghan |
| Publisher | : |
| Total Pages | : |
| Release | : 2001 |
| Genre | : |
| ISBN | : |
This paper investigates whether firms time the stock option repricing to coincide with favorable movements in the company's stock price. For a sample of 166 firms that repriced executive stock options during the period 1992 through 1997, we show that, in general, stock price rises sharply on the repricing date and continues to increase for the next twenty days. In addition, repricing often occurs just following the release of bad news or just prior to good news. Since no information about the stock option repricing is released around the repricing date, the evidence above is suggestive of management timing the option repricing date to precede other good news events that are announced.
| Author | : Frederick D. Lipman |
| Publisher | : Prima Lifestyles |
| Total Pages | : 0 |
| Release | : 2001 |
| Genre | : Employee stock options |
| ISBN | : 9780761533825 |
Numerous private and public companies offer stock option plans every year to motivate, retain, and reward employees. But implementing the right stock option plan can be a complex and daunting undertaking, without the proper guidance.The Complete Guide to Employee Stock Optionsunravels the mystery of creating a meaningful equity compensation plan for employees that is favorable for the business. Author and attorney Frederick D. Lipman describes in complete detail the legal, operational, and motivational aspects of developing a stock option program, whether it's for the new start-up looking to attract top talent or the venerable company looking for ways to reward its best performing employees. Readers will discover how to: * Understand the pros and cons of different option plans* Implement the right plan to meet the company's future plans* Motivate key employees with equity compensation* Minimize the risk of losing equity in a volatile market* And much moreThis book also includes useful information for employees who want to understand what their stock options mean and how to maximize their profitability. Complete wi
| Author | : James Reda |
| Publisher | : |
| Total Pages | : 6 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Due to recent drops in the stock market, many U.S. publicly traded companies are considering repricing stock options for their executives. Companies must balance the need to attract and retain executives with shareholder interests, since repricings effectively separate the interests of management and the interest of shareholders. Studies have shown little support for the traditional justifications for rich executive stock awards, such as a weak correlation between executive ownership and stock performance. Since stock market conditions have changed, the opportunity arises to re-structure executive compensation in line with expected stock market returns and company needs.
| Author | : Barbara M. Grein |
| Publisher | : |
| Total Pages | : 38 |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
We study whether employee stock option repricings are in the best interests of shareholders by investigating the excess stock returns associated with timely, non-contaminated announcements of repricings by Canadian firms. We develop four theories of why firms reprice employee stock options, and test the competing predictions the theories make regarding the mean announcement-date excess stock return, and the cross-sectional relations between announcement-date excess returns and candidate economic factors. For 57 non-contaminated repricing announcements over the period November 1994-July 2001, we document a significantly positive three-day mean announcement-date excess return of 6.6%. Combined with the results of cross-sectional regressions, we conclude that the market incorporates the probability of repricing into its pre-repricing assessment of firm value, and responds favorably to announcements of repricings for reasons of incentive realignment and employee retention. The market does not react as though managers use repricings to extract rents from shareholders, nor does the act of repricing appear to systematically reveal favorable private information about the firm.
| Author | : Barbara Pirchegger |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
A principal-agent model is used to analyze whether repricing stock option contracts can be beneficial for the contracting parties. A principal employs an agent and offers him anexogenously given contract that includes a fixed compensation payment as well as stock options. After the contract is signed, the agent performs two efforts that the principal cannot observe. As soon as the first effort is completed, both parties observe a signal that contains information about the final share price. At the end of the period the agent is paid according to his contract. The signal is assumed to reveal information about either an unobservable state of nature or the agent's first effort. For both settings a commitment scenario and a renegotiation scenario are compared. The paper shows that if the signal contains information about the state of nature to occur the renegotiation setting might weakly dominate the commitmentsetting. However, if the signal is informative about the agent's first effort, the renegotiation setting turns out to be weakly dominated by the commitment setting.
