Uncertainty avoidance and the timing of employee stock option exercise

Francesco Bova () and Marshall Vance
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Francesco Bova: University of Toronto
Marshall Vance: University of Southern California

Journal of International Business Studies, 2019, vol. 50, issue 5, No 4, 740-757

Abstract: Abstract We examine the impact of the cultural norm of uncertainty avoidance on employee stock option (ESO) exercise behavior using proprietary data from a multinational firm. We find that employees from countries with higher levels of uncertainty avoidance exercise their stock options earlier. These findings lend support to a maintained assumption in the ESO literature that employee attitudes toward uncertainty influence stock option exercise behaviors. Our findings further help to explain prior findings of cross-cultural differences in firms’ compensation practices by indicating that employee responses to option-based pay and firms’ consequent financial reporting costs vary as functions of employee uncertainty avoidance.

Keywords: uncertainty avoidance; employee stock options; option exercise; compensation; multinationals; subjective valuation; FAS 123R (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/s41267-018-0157-5

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