Are Executive Stock Option Exercises Driven By Private Information?

This paper examines the extent to which executive stock option exercises may be driven by private information. Contrary to the maintained assumption in prior literature that all shares acquired though exercises are immediately sold, authors found that no shares are sold within thirty days following approximately half of the exercises. Generally speaking, they find strong evidence that executives are exploiting positive private information when they exercise the options but hold the shares beyond thirty days, and weaker evidence that they are exploiting negative private information when they exercise the options and sell the shares within thirty days.

Provided by: University of California, Los Angeles (Anderson) Topic: Software Date Added: Apr 2006 Format: PDF

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