The Timing of Option Repricing
Posted: 13 Mar 2001
Date Written: November 2000
This paper investigates whether firms time the stock option repricing to coincide with favorable movements in the company's stock price. For a sample of 166 firms that repriced executive stock options during the period 1992 through 1997, we show that, in general, stock price rises sharply on the repricing date and continues to increase for the next twenty days. In addition, repricing often occurs just following the release of bad news or just prior to good news. Since no information about the stock option repricing is released around the repricing date, the evidence above is suggestive of management timing the option repricing date to precede other good news events that are announced.
Keywords: Executive Compensation, Corporate Governance, Options, Repricing
JEL Classification: M41, J33
Suggested Citation: Suggested Citation