Option Exercise by CEO's:overconfidence vs. market timing

Sattar Mansi, Yaxuan Qi and John Wald
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Sattar Mansi: University of Texas at San Antonio
Yaxuan Qi: University of Texas at San Antonio
John Wald: University of Texas at San Antonio

No 5, Working Papers from College of Business, University of Texas at San Antonio

Abstract: We examine the exercising behavior for executive stock option by S&P 500 CEOs from 1994 to 2003. We analyze whether the postponement decisions of CEOs are explained by the competing hypotheses of optimism (overconfidence) or market timing. For CEOs with high levels of option, overconfidence appears to play and important part in the postponement of exercise. CEOs having lower levels of options, however, are influenced by market timing concerns in their exercise decision, with overconfidence playing a role in the postponement decision.

Keywords: option exercise; market timing (search for similar items in EconPapers)
JEL-codes: G1 G21 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2007-02-04
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