Abstract

We examine the value and incentive effects of six nontraditional executive stock options: premium options, performance-vested options, repriceable options, purchased options, reload options, and indexed options. With reasonable parameter values, four options have lower value than a traditional option when granted, and large differences in value are evident across the types. Holding option value constant, five options create stronger incentives than traditional options to increase stock price, five create stronger incentives to increase risk, and three create stronger incentives to reduce dividend yield. Changing various option-specific parameters can produce large changes in incentive strengths.

Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call