EXECUTIVE STOCK OPTION EXERCISING BEHAVIOR: EVIDENCE FROM BURSA MALAYSIA

Ahmad Ibn Ibrahimy () and Rubi Ahmad ()
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Ahmad Ibn Ibrahimy: PhD Candidate, Department of Finance and Banking Faculty of Business and Accountancy University of Malaya, Kuala Lumpur, Malaysia

Far East Journal of Marketing and Management, 2012, vol. 2 No 2 Paper 2 August, issue 2, 14-24

Abstract: In spite of the fact that shareholders exercise their options when it is in the money, s eparation of ownership and control creates the necessity of verifying the adoption of corporate governance mechanism, such as Executive Stock Option Scheme (ESOs). This study verifies the relationship between Executive Stock Option (ESO) exercise and firm performance to explore the exercise pattern of Malaysian executives whether there is any differences in trading option. We found a significant positive relationship between ESO exercise and firm performance for both market and accounting based performance measures using data on ESO exercising from 201 non-financial companies. Panel data analysis of fixed effect estimation revealed the pattern that Malaysian executives exercise their options immediately after they are granted; suggesting intended behavior of adopting ESOs.

Keywords: Agency problem; Corporate governance; Management compensation; ESO exercising; Tobins q; Return on assets (ROA) (search for similar items in EconPapers)
JEL-codes: M1 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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