The Effect of Executive Stock Option Plans on Stockholders and Bondholders

Richard A DeFusco, Robert R Johnson and Thomas S Zorn

Journal of Finance, 1990, vol. 45, issue 2, 617-27

Abstract: Executive stock option plans have asymmetric payoffs that could induce managers to take on more risk. Evidence from traded call options and stock return data supports this notion. Implicit share price variance, computed from the Black-Scholes options pricing model, and stock return variance increase after the approval of an executive stock option plan. The event is accompanied by a significant positive stock and a negative bond market reaction. This evidence is consistent with the notion that executive stock options may induce a wealth transfer from bondholders to stockholders. Copyright 1990 by American Finance Association.

Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (142)

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1082%2819900 ... O%3B2-Z&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:45:y:1990:i:2:p:617-27

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().