Good Timing: CEO Stock Option Awards and Company News Announcements

David Yermack

Journal of Finance, 1997, vol. 52, issue 2, 449-76

Abstract: This article analyzes the timing of CEO stock option awards as a method of investigating corporate managers' influence over the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, the author finds that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies' quarterly earnings announcements are consistent with an interpretation that CEOs receive stock option awards shortly before favorable corporate news. The author evaluates and rejects several alternative explanations of the results, including insider trading and the manipulation of news announcement dates. Copyright 1997 by American Finance Association.

Date: 1997
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