Stock Option Repricing in Europe

43 Pages Posted: 17 Jan 2008

See all articles by Michael Sauer

Michael Sauer

affiliation not provided to SSRN

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Date Written: January 17, 2008


This paper investigates the link between option repricing, firm performance and corporate governance in Europe. Our sample consists of 77 European firms that repriced their stock option between 1987 and 2003. We document that option repricing is mainly a phenomenon for young and fast growing firms that showed a sharp decline in accounting and stock price performance in the two years prior to the repricing. On the day of the repricing, the exercise prices of the outstanding options are on average 60% above the share prices. This underwater problem is corrected through the repricing. In 20% of all sample firms the associated change in the Black Scholes-value exceeds 10% of the firms' market capitalization. The repricing implies an average increase in the annual salary of an executive of about 40%. Cash salaries are not adjusted downwards when options are repriced. The performance of the repricing firms improves significantly after the repricing. We provide evidence that suggest that the favorableness of the repricing structures is related to corporate governance structures.

Keywords: Executive Stock Options, Option Repricing, Comparative Corporate Governance

JEL Classification: G30, G32

Suggested Citation

Sauer, Michael and Sautner, Zacharias, Stock Option Repricing in Europe (January 17, 2008). Available at SSRN: or

Michael Sauer (Contact Author)

affiliation not provided to SSRN

Zacharias Sautner

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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