The Timing of Option Repricing

Posted: 13 Mar 2001

See all articles by Sandra Renfro Callaghan

Sandra Renfro Callaghan

Texas Christian University - Department of Accounting

P. Jane Saly

University of St. Thomas - Department of Accounting

Chandra Subramaniam

California State University, Northridge - David Nazarian College of Business and Economics

Date Written: November 2000

Abstract

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

Renfro Callaghan, Sandra and Saly, P. Jane and Subramaniam, Chandra, The Timing of Option Repricing (November 2000). Available at SSRN: https://ssrn.com/abstract=261084

Sandra Renfro Callaghan (Contact Author)

Texas Christian University - Department of Accounting ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States
817-257-7191 (Phone)
817-257-7227 (Fax)

P. Jane Saly

University of St. Thomas - Department of Accounting ( email )

1000 LaSalle Avenue
Mail #TMH343
Minneapolis, MN 55403-2005
United States
651-962-4254 (Phone)
651-962-4710 (Fax)

Chandra Subramaniam

California State University, Northridge - David Nazarian College of Business and Economics ( email )

Northridge, CA 91330
United States

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