Option trading activity and capital reallocation efficiency: Evidence from corporate restructurings

Scott Fung and Robert Loveland

Finance Research Letters, 2024, vol. 66, issue C

Abstract: We examine whether option trading enables firms to restructure more efficiently and thus achieve better economic outcomes. We find that more option trading is associated with greater operating performance and higher firm value in the years following restructuring, after controlling for other determinants of performance and value. The central findings survive the consideration of endogeneity. Our results suggest that option trading produces a feedback effect that allows for a more economically efficient allocation of capital.

Keywords: Option trading; Mergers and acquisitions; Corporate restructuring (search for similar items in EconPapers)
JEL-codes: G10 G13 G14 G21 G34 G39 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612324005671
Full text for ScienceDirect subscribers only

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:eee:finlet:v:66:y:2024:i:c:s1544612324005671

DOI: 10.1016/j.frl.2024.105537

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().