Executive Stock Options and Manipulated Stock-Price Performance

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)249-281
Journal / PublicationInternational Review of Finance
Issue number3
Publication statusPublished - Sep 2012


Previous studies have examined the manipulation of executive stock option awards and exercises, focusing on information timing by managers. In this paper, we investigate managerial manipulation of stock-price performance motivated by stock options. To distinguish performance manipulation from information timing, we examine stock returns surrounding the departure of retiring CEOs, whose option holdings typically expire shortly after their departure and whose chances to manipulate option awards and exercises are minimized. Consistent with manipulated performance, we find significant abnormal stock returns in the months surrounding CEO departure for those with strong option incentives, which are reversed shortly after CEO departure.