Private Information in Executives' Option Trades: Evidence from the UK

Kyriacos Kyriacou, Kul Luintel () and Bryan Mase

No E2008/4, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper investigates whether UK executives use private information in the trading decisions associated with the exercise of their executive stock options. We find that UK executives' exercise and sell decisions are motivated by their private information but not by their anticipation of future return volatility. These findings appear robust when we control for additional motivating factors that include option moneyness, the previous stock return and the value of the exercise. We argue that the disparity in the informativeness of US and UK executives' trades at exercise is related to important differences in executive remuneration, and in the regulation and taxation of executive stock options.

Keywords: Executive remuneration; executive stock options; trade informativeness (search for similar items in EconPapers)
JEL-codes: G14 G18 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2008-02
New Economics Papers: this item is included in nep-mst
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Published in Economica , vol. 77 (2010), 751-774

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