DP12318 Changes in CEO Stock Option Grants: A Look at the Numbers

Author(s): Vasiliki Athanasakou, Daniel Ferreira, Lisa Goh
Publication Date: September 2017
Keyword(s): CEO overconfidence, corporate investment, stock option grants
JEL(s): G30, G32, J33, M41, M52
Programme Areas: Financial Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12318

We study changes in CEO stock option grants. Unlike most of the literature, we focus on the number rather than the value of options granted. We first provide a detailed description of the main aggregate trends in CEO stock option grants. We then consider the cross-sectional heterogeneity in option-granting activity. We find that CEOs who either overinvest or underinvest subsequently receive fewer stock options as part of their compensation packages. CEOs who hold exercisable deeply-in-the-money options (overconfident CEOs) also receive fewer stock options in subsequent periods. Our findings provide insights into the dynamics of CEO compensation contracts.