Stock Option Plans for Non-Executive Employees

By John E. Core, W. Guay. 2001

713 citations recorded by the source corpus.

We examine determinants of non-executive employee stock options outstanding, grants, and exercises for 756 firms during 1994 to 1997. We find that firms use greater stock option compensation when facing capital requirements and financing constraints. Our results are also consistent with firms using options to attract certain types of employees, provide retention incentives, and create incentives to increase firm value. After controlling for economic determinants and stock returns, option exercises are greater (less) when the firm's stock price hits 52-week highs (lows), which confirms in a broad sample the psychological bias documented by Heath, Huddart, and Lang (1999).

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/c9d4fde8bf5e639684b584010b73643f8a566bb1

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Citations in the corpus

Rank and File Employees and the Discovery of Misreporting: The Role of Stock Options (2016, positive): “Consistent with Core and Guay (2001), we include two proxies to control for financial constraints.”
The Structure and Performance Consequences of Equity Grants to Employees of New Economy Firms (2003, methodology): “similar study of executive option grants (Core and Guay (1999)).”
Information distribution within firms: evidence from stock option exercises (2001, background): “(1999) and Core and Guay (2001) find that stock option exercise increases 6 This is a formula for valuing American options on dividend-paying stocks.”
Neighborhood matters: The impact of location on broad based stock option plans ☆ (2009, neutral): “characteristics and industry membership identified by Core and Guay (2001), Ittner, Larcker and Lambert (2001) and Oyer and Schaefer (2005).”
Executive Equity Compensation and Incentives: A Survey (2005, positive): “Core and Guay (2001a) develop and validate an inexpensive and accurate method of estimating option portfolio value and the sensitivities of option portfolio value to stock price and stock-return volatility that is easily implemented using data from only the current year’s proxy statement or annual…”
Do firms understate stock option-based compensation expense disclosed under SFAS 123? (2006, methodology): “options when option values are higher (Core and Guay, 2001).”
Behavioral Corporate Finance: An Updated Survey (2011, positive): “In the context of consumer contracts, Della Vigna and Malmendier (2004) suggest that credit cards and health club contracts are shaped by naïve expectations and timeinconsistent preferences.”
Why Do Some Firms Give Stock Options To All Employees?: An Empirical Examination of Alternative Theories (2005, neutral): “Core and Guay (2001), for example, combine the ExecuComp data on option grants to top executives with information about aggregate option grants from firms’ annual reports.”
CEO Compensation, Change, and Corporate Strategy (2005, neutral): “Core and Guay (2001) describe the cross-sectional variation of executive compensation, finding that the median large firm has options outstanding that amount to 5.5% of common stock, rising to 10–14% for growth industries (computer, software, pharmaceutical) but only 2–3% for low-growth industries…”
Incentives, Targeting and Firm Performance: An Analysis of Non-Executive Stock Options (2010, neutral): “We also segment the incentive measure by high and low growth opportunities per employee (Core and Guay (2001)), and repeat our analysis.”
A Review of the Empirical Disclosure Literature: Discussion (2001, neutral): “Further, options owned by the executives who are likely to make disclosure decisions constitute a small fraction of shares reserved for options (Core and Guay, 2001).”