Stocking up: Executive optimism, option exercise, and share retention

Rik Sen and Robert Tumarkin

Journal of Financial Economics, 2015, vol. 118, issue 2, 399-430

Abstract: We show that an executive is optimistic about her company׳s prospects if and only if she retains some of the shares received whenever she exercises company stock options. Empirically, an indicator of optimism based on this idea matches the expected relations between optimism and corporate decision-making better than commonly used indicators based on the timing of option exercise. This makes sense, as our model of an executive׳s optimal option exercise and portfolio choice demonstrates that the timing of option exercise depends just as much on stock and other executive characteristics as it does on optimism.

Keywords: Optimism; Executive stock option; Exercise policy; Optimism measures; Corporate financial policies (search for similar items in EconPapers)
JEL-codes: G11 G30 G32 G34 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:118:y:2015:i:2:p:399-430

DOI: 10.1016/j.jfineco.2015.08.001

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