Neighborhood matters: The impact of location on broad based stock option plans

Simi Kedia and Shiva Rajgopal

Journal of Financial Economics, 2009, vol. 92, issue 1, 109-127

Abstract: We find that fixed effects related to the location of firms' headquarters explain variation in broad based option grants after controlling for industry effects and firm characteristics traditionally known to affect option granting. Location matters because of local labor market conditions and social interaction with neighboring firms. Broad based option grants are higher: (i) when a firm's stock prices co-move more with stock prices of other firms located in that Metropolitan Statistical Area (MSA); (ii) in states that are less likely to enforce non-compete agreements; and (iii) in MSAs where employees prefer options because stocks there experience abnormally high returns.

Keywords: Geography; Stock; options; Location; Employee; compensation; Retention (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (101)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:92:y:2009:i:1:p:109-127

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