The Effect of Stock Option Repricing on Employee Turnover

Posted: 1 Aug 2003

See all articles by Mary Ellen Carter

Mary Ellen Carter

Boston College - Department of Accounting

Luann J. Lynch

University of Virginia - Darden School of Business

Abstract

We examine whether repricing underwater stock options reduces both executive and overall employee turnover using a sample of firms that reprice stock options in 1998 and a sample of firms with underwater stock options that choose not to reprice. We find little evidence that repricing affects executive turnover. However, using forfeited stock options to proxy for overall employee turnover, we find that employee turnover in 1999 is negatively related to the 1998 repricing, suggesting that repricing helps to prevent turnover due to underwater options. We find no evidence that the relation between turnover and repricing differs between high technology and nonhigh technology firms.

Keywords: Executive Compensation, Stock Option Repricing, Employee Turnover, Employee Retention

JEL Classification: M41, J33, J63, M52

Suggested Citation

Carter, Mary Ellen and Lynch, Luann J., The Effect of Stock Option Repricing on Employee Turnover. Available at SSRN: https://ssrn.com/abstract=421220

Mary Ellen Carter (Contact Author)

Boston College - Department of Accounting ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Luann J. Lynch

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4721 (Phone)
434-243-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lynch.htm

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