The Effect of Stock Option Repricing on Employee Turnover
Posted: 1 Aug 2003
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: Suggested Citation