Employee stock option exercises an empirical analysis

Steven Huddart, Mark Lang

Research output: Contribution to journalArticle

214 Scopus citations

Abstract

This paper describes the exercise behavior of over 50,000 employees who hold long-term options on employer stock at eight corporations. Employees typically exercise options years before expiration, commonly sacrificing half of the Black-Scholes value. Exercise is strongly associated with recent stock price movements, the market-to-strike ratio, proximity to vesting dates, time to maturity, volatility, and the employee's level within the company. These findings have implications for compensation planners, the FASB as it develops a new accounting standard for options, and financial statement users and preparers who apply and interpret the new FASB standard.

Original languageEnglish (US)
Pages (from-to)5-43
Number of pages39
JournalJournal of Accounting and Economics
Volume21
Issue number1
DOIs
StatePublished - Feb 1996

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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