How Do Managers Behave in Stock Option Plans? Clinical Evidence From Exercise and Survey Data
Year: 2009
Type: article
Abstract: We use unique case study data to analyze the behavior of top managers in an executive stock option plan. We gather questionnaire data on the managers' traits and combine it with exercise data. Managers in our sample expect low volatilities (compared to historical estimates) and are well diversified and modestly risk averse. This implies that the value–cost wedge of options can be smaller than usually assumed. The exercise decisions vary with expected volatility, managerial wealth, and mental accounting. Managers expecting lower volatility exercise earlier. This result is consistent with the predictions of expected utility models using our managers' survey parameters.
Authors: Zacharias Sautner, Martin Weber
Institutions: University of Amsterdam, University of Mannheim
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2102511892