Stock Options Research Articles

Shareholder Patience: Implications for Executive Compensation and Firm Performance

Purpose: This paper explores how shareholder patience can influence firm performance and the efficacy of executive compensation and corporate governance in organizations. The shareholders’ patience, as reflected in their tendency to hold stock for extended periods, enables firm management to make long-term decisions and sustain ongoing project stability, which reflects positively on firm value. Shareholder patience amplifies the positive effects of un-exercisable options on a firm’s long-term performance and restrains overconfident CEOs by improving governance rather than by relying on market reactions, which positively influences performance.Study design/methodology/approach: The quantitative analysis conducted in this paper utilizes a fixed-effects regression model.Sample and data: This paper utilizes a multi-industry sample of 1,397 publicly traded U.S. firms that operated between 1999 and 2016. The data were retrieved from various archival sources.Results: Shareholders’ patience was positively associated with a firm’s performance, both in the short term and the long term. Further, the shareholders’ patience accentuated the positive effects of TMT un-exercisable stock options on the firm’s long-term performance but did not influence the negative effects of TMT exercisable stock options on the firm’s performance. Shareholder patience weakened the negative effects of CEO overconfidence on firm performance.Originality/value: This paper provides evidence of the effects of shareholders’ patience on the efficacy of executive compensation, which reflects positively on a firm’s performance.Research limitations/implications: The findings presented in this paper have limitations in terms of generalizability to non-U.S. firms and private and entrepreneurial firms.

Sharing Shares with Employees: Tools and Empirical Evidence from Lithuania

Abstract This paper discloses the situation, specifics, tendencies, and limitations of employers’ adjustment to employee financial participation (sharing shares) in companies in Lithuania. Three main tools are analyzed: the issuance of employee shares (known since 1990); a share granting (effective since 2018); and employee stock options. The empirical part of the paper is based on interviews conducted in 2019 and repeated in 2022–2023 with expert lawyers from Lithuanian law firms, alongside a survey of Lithuanian companies. The following aspects were analyzed: employers’ knowledge of the possibilities of involving employees in company management (activities); instruments used by employers to implement employee financial participation; reasons that prevent successful employee involvement and barriers from the perspective of employees; tax-related issues; and measures that could facilitate greater employee involvement within the company. The research results show that there is a tendency that promotion via shares is becoming more popular and that business culture is slowly evolving. Employee stock options are the most used instrument, surpassing the use of statutory tools to grant shares to employees.

CEO and CFO Stock Options and Trading Activity Around Bank Loans

CEO and CFO Stock Options and Trading Activity Around Bank Loans

PERHITUNGAN HARGA OPSI EROPADENGAN METODE TRINOMIAL PADA PERUSAHAAN MITSUBISHI

Investment is an important instrument in the financial market. The investment objective is to obtain large profits with minimum capital. The trend that is currently developing is that investors are not only interested in investing in real assets, but they have great attention to investing in financial assets such as shares. However, to gain profits, investors must face risk and uncertainty. Among the solutions to reduce these risks are derivatives. Stock options are one of the widely used derivative products. An important instrument in stock options is the method of determining option prices according to the type of option. European option prices can be determined using several methods, namely the Black-Scholes method, binomial method, and trinomial method. This research aims to implement the trinomial method in determining European option prices, both Call options and Put options on Mitsubishi UFJ Financial Group (MUFG) shares. The results of determining option prices using the trinomial method are then compared with the results of the Black-Scholes method which aims to analyze the convergence of the two. The research results show that the trinomial method can be used to determine stock option prices for the Mitsubishi company more flexibly than the Black-Scholes method. In addition, the results show that the trinomial model converges to the Black-Scholes method.

Stock Option Pricing Using Binomial Trees with Implied Volatility

The Black-Scholes model provides an analytical solution in option pricing and has been widely used in finance. This model assumes constant volatility. Pricing option incorporating implied volatility is conducted using implied binomial tree. This study aims to simulate the prices of put options and call options using implied binomial trees, binomial trees and the Black-Scholes model and determine the factors that influence option prices. The simulation was conducted using Matlab. The option price resulted from implied binomial tree and binomial tree are compared with the option prices of the Black-Scholes model to determine the difference of option prices with constant volatility and option prices incorporating implied volatility. The implied binomial tree method provides better option prices than the binomial tree based on small relative error value to the Black-Scholes model. This is caused by the transition probability value of stock price movements in the implied binomial tree at each point is different, whereas in the binomial tree the value of transition probability is same. Furthermore, increasing the time step causes the option prices obtained from the implied binomial tree converge to the Black-Scholes. It is concluded that these three methods can be used in option pricing. Factors that influence the option price are stock price, strike price, interest rate and maturity date, are also obtained

Analisis Perbandingan Kinerja Perusahaan Sebelum dan Sesudah Employee Stock Option Program (ESOP) (Studi Empiris pada Perusahaan Manufaktur yang Listing di Bursa Efek Indonesia Tahun 2017-2020)

Implementation of the Employee Stock Option Program in this study aims to compare the company's performance both before and after the implementation of the Employee Stock Option Program for manufacturing companies listed on the IDX in 2017-2020. This research is a manufacturing issuer with as many as 193 companies. Purposive Sampling used in the sampling technique, so that a sample of 11 companies. Available analytical methods include descriptive statistical data analysis, normality test which also uses other tests (paired sample t test), and hypothesis testing with the Paired Sample Test and Wilcoxon test. The results of the study concluded that there were no differences in ROA, ROE, NPM, and TATO before and after the implementation of ESOP in manufacturing companies listed on the IDX for the 2017-2020 period.

Estimating a Function and Its Derivatives Under a Smoothness Condition

We consider the problem of estimating an unknown function [Formula: see text] and its partial derivatives from a noisy data set of n observations, where we make no assumptions about [Formula: see text] except that it is smooth in the sense that it has square integrable partial derivatives of order m. A natural candidate for the estimator of [Formula: see text] in such a case is the best fit to the data set that satisfies a certain smoothness condition. This estimator can be seen as a least squares estimator subject to an upper bound on some measure of smoothness. Another useful estimator is the one that minimizes the degree of smoothness subject to an upper bound on the average of squared errors. We prove that these two estimators are computable as solutions to quadratic programs, establish the consistency of these estimators and their partial derivatives, and study the convergence rate as [Formula: see text]. The effectiveness of the estimators is illustrated numerically in a setting where the value of a stock option and its second derivative are estimated as functions of the underlying stock price.

Non-invasive Blood Glucose Monitoring Using a Radiofrequency Sensor and a Machine Learning Model

Diabetes Mellitus (DM) affects over 530 million people globally and is a condition characterized by high blood glucose (BG) that can result in severe long-term health consequences if poorly managed. To mitigate the risks associated with DM, it is crucial to regulate BG levels through regular monitoring. Current methods of monitoring BG come with drawbacks in the form of pain and expense. With the rapid increase in prevalence of DM, there is an increasing need for economical, accurate, and non-invasive continuous measures of BG. Here we present a validation for a novel sensor that rapidly scans through a wide range of radio frequencies (RF) and uses machine learning (ML) techniques for the purpose of non-invasive BG measurement. After model training, the RF sensor and ML techniques employed in this study can predict BG at a level significantly better than chance, as shown below. Data were collected from 13 healthy participants over a series of tests lasting 2 – 3 hours. During each test, participants placed their forearm on an RF sensor that measured their BG levels using sweeps across the 500 MHz – 1500 MHz range at 0.1 MHz intervals. Participants ingested 37.5 grams of glucose solution to generate BG readings across normoglycemic and hyperglycemic ranges. Each sweep took approximately 22 seconds, including a one second pause between sweeps. Across 110 tests, we collected 3,311 BG observations. Concurrent measurements from a Continuous Glucose Monitor (CGM) were taken as reference. Data were divided using a 60-20-20 (training-validation-test) split and trained on a Light Gradient-Boosting Machine (lightGBM) model to predict BG values. A ‘blind’ evaluation of model performance was determined using the held-out test dataset. We predicted BG values in the held-out test dataset with a Mean Absolute Relative Difference (MARD) of 10.8% in the normoglycemic range and 15.9% in the hyperglycemic range (11.27% overall MARD). These results were significantly better than a chance model (two-sample t-test, p <0.01). In a Surveillance Error Grid analysis of model accuracy, 89.0% of predictions fell in Risk Level 0, 10.1% in Risk Level 1, and 0.9% in Risk Level 2. These results demonstrate that the novel RF sensor and ML techniques described can predict a reference BG value in the population under study. More research is underway to refine and expand these methods using a gold-standard blood glucose reference device and among a broader participant population with an expanded glucose range. DK and VS are consultants for and own stock in Know Labs. JA and KC are employed by and have stock options in Know Labs. CW and KP are consultants for Know Labs. NA. This is the full abstract presented at the American Physiology Summit 2024 meeting and is only available in HTML format. There are no additional versions or additional content available for this abstract. Physiology was not involved in the peer review process.

P170 Ixekizumab significantly improved quality of life and joint pain in patients with psoriatic arthritis, nail disease and distal interphalangeal joint involvement from SPIRIT-H2H

Abstract Background/Aims Among adults with psoriatic arthritis (PsA) in the SPIRIT H2H study, 65% had nail psoriasis (PsO) at baseline and of these, 96.2% had simultaneous distal interphalangeal joint (DIP) disease in ≥ 1 digits at baseline. This analysis describes the impact of ixekizumab (IXE) and adalimumab (ADA) on quality of life (QoL), function and joint pain. Methods This post-hoc analysis included patients from SPIRIT-H2H (NCT03151551) treated with either IXE or ADA who had simultaneous nail and DIP involvement (swelling or tenderness) in ≥ 1 digits at baseline. Nail PsO was measured using Nail Psoriasis Severity Index (NAPSI). Joint involvement was measured by tender/swollen joint count scores. Joint pain was measured by patient’s assessment of pain using Visual Analogue Scale (100 mm). QoL measures included Dermatology Life Quality Index (DLQI), Health Assessment Questionnaire-Disability Index (HAQ-DI) and Short Form-36 Mental and Physical Component Summary Scores (SF-36 MCS/PCS). Patients were evaluated at baseline and Week 4, 8, 12, 16, 24, 32, 40, and 52. Joint pain and SF-36 MCS/PCS changes from baseline were analysed using a mixed effects model of repeated measures. Proportions of patients achieving DLQI ≤1 or HAQ-DI change ≥0.35 (minimal clinically important difference) were analysed using logistic regressions. Non-responder imputation and modified baseline observation carried forward methods were used for missing data. Results 354 SPIRIT-H2H patients had a NAPSI total score >0 and DIP involvement in ≥ 1 digits simultaneously at baseline (IXE, N = 186 and ADA, N = 168). Among them, IXE-treated patients had a significant improvement in joint pain at Week 4 and a larger improvement in joint pain over 52 weeks vs ADA-treated patients. In addition, a larger proportion of IXE-treated patients achieved a DLQI score of 0 or 1, and these statistically significant differences were observed as early as Week 4 and sustained at each visit over 52 weeks. IXE-treated patients also experienced statistically significant improvements in SF-36 MCS at Week 4, 12 and 32 compared to ADA-treated patients; numerically greater improvements in favor of IXE were sustained at all other visits. IXE-treated patients showed a larger improvement in SF-36 PCS over 52 weeks vs ADA-treated patients, and these differences reached statistical significance at Week 24 and 32. Similar proportions of patients treated with IXE or ADA showed a clinically important improvement in HAQ-DI. Conclusion In patients with simultaneous nail and DIP involvement in ≥ 1 digit at baseline, IXE treatment resulted in significant improvements across multiple QoL measures, and greater improvements in joint pain compared to ADA treatment. These data may help health care providers make clinical decisions concerning the care of PsA in patients with nail and DIP involvement. Disclosure C. Ritchlin: Consultancies; C. Ritchlin has received consulting fees and/or honoraria and/or grant support from: AbbVie, Bristol-Myers Squibb, Eli Lilly and Company, Janssen, Novartis, Pfizer, UCB Pharma. A. Kavanaugh: Consultancies; A. Kavanaugh has received consulting fees and/or honoraria from: AbbVie, Eli Lilly and Company, Janssen, Novartis, Pfizer, UCB Pharma. L. Kristensen: Consultancies; L.E. Kristensen has received consulting fees and/or honoraria and/or research support from: Pfizer, AbbVie, Amgen, UCB Pharma, Gilead, Biogen, BMS, MSD, Novartis, Eli Lilly and Company, Janssen. J. Merola: Consultancies; J. F. Merola is a consultant and/or investigator for: Amgen, Bristol-Myers Squibb, AbbVie, Dermavant, Eli Lilly and Company, Novartis, Janssen, UCB Pharma, Sanofi-Regeneron, Sun Pharma, Biogen, Pfizer. B. Strober: Corporate appointments; B. Strober has been serving as an Editor-in-Chief for the Journal of Psoriasis and Psoriatic Arthritis; and serving as scientific co-director and investigator for CorEvitas Psoriasis Registry. Consultancies; B. Strober has served as a speaker for and/or has received consulting fees and/or honoraria from: AbbVie, Alamar, Alumis, Almirall, Amgen, Arcutis, Arena, Aristea, Asana, Boehringer Ingelheim. Shareholder/stock ownership; reports having stock options in Connect Biopharma, Mindera Health. Honoraria; He is also a consultant for Immunic Therapeutics, Kangpu Pharmaceuticals, Bristol-Myers-Squibb, Connect Biopharma, Dermavant, Evelo Biosciences, Incyte, Janssen, Leo, Eli Lilly and Company, Maruho. Grants/research support; He is also a consultant for Meiji Seika Pharma, Mindera Health, Protagonist, Nimbus, Novartis, Pfizer, UCB Pharma, Sun Pharma, Regeneron, Sanofi-Genzyme, Union Therapeutics, Ventyxbio, vTv Therapeutic. J. Lisse: Consultancies; J. Lisse is employee and stockholder of Eli Lilly and Company. R. Bolce: Shareholder/stock ownership; R. Bolce is employee and stockholder of Eli Lilly and Company. C. Sapin: Shareholder/stock ownership; C. Sapin is employee and stockholder of Eli Lilly and Company. J. Pustizzi: Shareholder/stock ownership; J. Pustizzi is employee and stockholder of Eli Lilly and Company. D. McGonagle: Consultancies; D. McGonagle has received consulting fees and/or honoraria and/or research grants from: AbbVie and Eli Lilly and Company. Grants/research support; His funding sources include or have included the Wellcome Trust-EPSRC, UK NIHR, ARUK, MRC UK and EU FP7 programme.

P172 An integrated safety analysis of treatment-emergent fungal infections in patients with psoriasis, psoriatic arthritis, or axial spondyloarthritis treated with ixekizumab from 26 clinical studies

Abstract Background/Aims Interleukin (IL)-17 plays a role in host defense against common extracellular pathogens, including fungi. Treatment with IL-17 inhibitors has been associated with fungal infections. Ixekizumab (IXE) is an anti-IL-17A monoclonal antibody approved for the treatment of psoriasis (PsO) in adults and children, psoriatic arthritis (PsA) in adults, and axial spondyloarthritis (axSpA) in adults. This integrated post-hoc analysis investigates treatment-emergent fungal infections in IXE-treated patients across the approved indications. Methods Safety data on fungal infections were pooled from the IXE paediatric and adult clinical trial programs, comprising 26 clinical studies. Here, we describe the types of fungal infections, number of infections, recurrence (defined by at least two separate events irrespective of location), severity (defined at the investigator’s discretion), events that lead to discontinuation, and anti-fungal medications. Data are presented as frequency or incidence rate per 100 person-years (IR). Results Fungal infections were reported in patients with PsO (IR = 4.0), PsA (IR = 4.1), and axSpA (IR = 2.7). Across indications, most fungal infections were not recurrent and were classified as mild or moderate in severity. There were few severe fungal infections in patients with PsO (IR = 0.1), PsA (IR = 0.0), and axSpA (IR = 0.0). Most fungal infections in patients with PsO, PsA, and axSpA were candidiasis (IR = 1.9, IR = 2.5, IR = 1.4, respectively) and superficial dermatophytosis (IR = 1.5, IR = 1.0, IR = 1.0, respectively). No cases of subcutaneous and systemic mycosis infections were reported. The proportions of patients with PsO, PsA, and axSpA who received a topical vs systemic anti-fungal medication were 53.6% vs 1.1%, 47.8% vs 0.0%, and 45.6% vs 3.5%, respectively (Table 1). Most fungal infections did not lead to discontinuation of IXE (Table 1). Conclusion Consistent with previously disclosed IXE data, the majority of treatment-emergent fungal infections observed in patients with PsO, PsA, or axSpA treated with IXE were: (i) not recurrent; (ii) mild or moderate in severity, (iii) associated with candidiasis and superficial dermatophytosis, (iv) managed with topical anti-fungal medications or no treatment reported, and (v) not leading to drug discontinuation. Disclosure S. Schwartzman: Corporate appointments; SS reports being a board member of the National Psoriasis Foundation. Consultancies; S. Schwartzman has served as a speaker and/or consultant for AbbVie, Janssen, Eli Lilly and Company, Pfizer, UCB, Myriad, Novartis, Regeneron, Sanofi, Stelexis, Jubilant, Teijin. L. Puig: Corporate appointments; Board member of the International Psoriasis Council. Consultancies; AbbVie, Almirall, Amgen, Boehringer Ingelheim, Bristol Myers Squibb, Janssen, Leo Pharma, Eli Lilly and Company, Novartis, Pfizer, Sandoz, Sanofi, UCB. Honoraria; Boehringer Ingelheim, Janssen, Eli Lilly and Company, Novartis, UCB, travel support from Janssen, Eli Lilly and Company, Pfizer, UCB. Grants/research support; L. Puig reports receiving grants from AbbVie, Almirall, Amgen, Boehringer Ingelheim, Leo Pharma, Eli Lilly and Company, Novartis, Pfizer, Sanofi, UCB. A.D. Cohen: Honoraria; AbbVie, Amgen, Boehringer Ingelheim, Dexcel Pharma; Janssen, Eli Lilly and Company, Neopharm, Novartis, Perrigo, Pfizer, Rafa. Grants/research support; A. D. Cohen has served on advisory board for Samsung, and reports receiving grants from AbbVie, Janssen, Novartis, Pfizer, travel support from AbbVie. S. Khattri: Consultancies; S. Khattri reports being part of Eli Lilly and Company speaker’s bureau, receiving consulting fees and honoraria from Eli Lilly and Company, AbbVie, UCB, Janssen, BI, Regeneron, Leo Pharma. C. Jossart: Shareholder/stock ownership; C. Jossart is a stockholder of Eli Lilly and Company and was an employee of Eli Lilly and Company when this study was conducted. C. Diaz: Shareholder/stock ownership; C. Diaz is employee and stockholder of Eli Lilly and Company. A. Garrelts: Shareholder/stock ownership; A. Garrelts is employee and stockholder of Eli Lilly and Company. D. Zhu: Shareholder/stock ownership; D. Zhu is employee and stockholder of Eli Lilly and Company. N. Eberhart: Shareholder/stock ownership; N. Eberhart is employee and stockholder of Eli Lilly and Company. A. Eleftheriadi: Shareholder/stock ownership; A. Eleftheriadi is employee and stockholder of Eli Lilly and Company. N. Tangsirisap: Shareholder/stock ownership; N. Tangsirisap is employee and stockholder of Eli Lilly and Company. C. Schuster: Shareholder/stock ownership; C. Schuster is an employee and stockholder of Eli Lilly and Company. A.B. Gottlieb: Consultancies; Xbiotech (stock options for an RA project). Honoraria; Amgen, AnaptysBio, Avotres Therapeutics, Boehringer Ingelheim, Bristol Myers Squibb, Dice Therapuetics, Dermavant, Lilly, Janssen, Leo, Pharma, Novartis, Pfizer, Sanofi, Sun Pharma, UCB Pharma. Grants/research support; AnaptysBio, Moonlake Immunotherapeutics, Novartis, BMS, and UCB Pharma; all funds go to the Icahn School of Medicine at Mount Sinai. M. Sheesh: Shareholder/stock ownership; MS is a full-time employee and minor share holder of Eli-Lilly and Company.

Linzagolix therapy versus a placebo in patients with endometriosis-associated pain: a prospective, randomized, double-blind, Phase 3 study (EDELWEISS 3).

Linzagolix therapy versus a placebo in patients with endometriosis-associated pain: a prospective, randomized, double-blind, Phase 3 study (EDELWEISS 3).

Too much incentive to innovate? CEO stock option exercise and myopic R&D management

AbstractInnovation is a key driver of firm success. To encourage innovation, firms often offer equity‐based compensation, such as stock options, to better align CEOs' personal interests with shareholder value. Drawing on agency theory, we argue that stock options may not always benefit a firm by encouraging innovation. Instead, we demonstrate that CEOs intending to exercise their stock options have the incentive to be myopic in R&D management so that they can temporarily boost the stock price and, thus, increase their personal wealth. Using a unique multi‐source dataset of 335 Standard & Poor 500 companies from 2007 to 2015, we find evidence supporting this argument. Moreover, the findings suggest that factors that can affect the perceived pressure to promote innovation by CEOs might reshape the association between stock option exercise and myopic R&D management. For example, power resulting from CEO duality decreases the perceived pressure to promote innovation, which increases the likelihood of CEOs engaging in myopic R&D management when exercising their stock options. However, when shareholders present a long investment horizon or when firms have high innovativeness, CEOs perceive more pressure to promote innovation and thus are less likely to opt for myopic R&D management while exercising stock options. The findings provide important insights for better understanding and controlling managerial myopia in innovation management.

The Performance Analysis of Trading Strategies Based on Insider Silence

Abstract Seyhun (1986) argues that insider buying predicts positive future returns, while insider selling reveals only a slight signal to predict negative future returns, possibly to satisfy liquidity needs. Gao et al. (2021) find that insiders are afraid of exposure to litigation risk, they neither sell their stocks on bad news nor buy, so insiders keep silent. Based on Gao et al. (2021), we construct the portfolio, which is to buy the “insider sell” group and to sell the “insider silence” group. According to Johnson and So (2012), the O/S portfolio is constructed based on the ratio of individual stock options to the trading volume of the underlying stock. F/S portfolio is constructed by the ratio of individual stock futures to the trading volume of the underlying stock. We find that under the holding period of more than one year, the performance of insider trading strategy is better than other strategies. Specifically, “buying insider purchases and selling insider sales” strategies are more profitable with longer holding periods. Moreover, the longer the holding period of OS and FS strategies, the greater the negative return effect. JEL classification numbers: G11, G12, G14. Keywords: Insider trading, Insider silence, OS strategy, FS strategy, and one-dimensional strategy.

Quality issues of implied volatilities of index and stock options in the OptionMetrics IvyDB database

AbstractFor stock and index options in the United States, OptionMetrics records prices at 3:59 p.m., not 4:00 p.m. as assumed in previous literature. The resulting 1‐min time discrepancy with closing share prices creates artificial variability in implied volatility spreads and strongly affects market‐wide spreads. It leads to particularly large distortions at the onset of the COVID‐19 pandemic. For index options in Europe, OptionMetrics data show large deviations from put‐call parity even though the original option prices match the parity exactly. Finally, the implied volatilities of stock options in Europe show clusters of exceptional deviations due to incorrect dividend information.

The effects of firm-specific incentives (stock options) on mobility and employee entrepreneurship

We consider the effect of employee stock options on employee mobility and employee entrepreneurship. Employee stock options are firm-specific, long-term, equity-based incentive instruments—attractive properties for affecting employee behaviors and decisions. We argue that employee stock options reduce employee mobility levels. By contrast, we posit that employee stock options increase employee entrepreneurship levels, and even more so when a firm's knowledge scope is narrow. Using the semiconductor industry as the setting, we document not only the negative effect of employee stock options on employee mobility levels but also the positive impact on employee entrepreneurship levels; the positive impact is also more substantial in firms with a narrow knowledge scope. We contribute to the literature that examines the influence of organizational conditions on the origins of entrepreneurship. We also inform research on strategic human capital by explicating the divergent effects of firm-specific incentives on two crucial human capital outcomes for firms.

ESHRE guideline: number of embryos to transfer during IVF/ICSI†.

ESHRE guideline: number of embryos to transfer during IVF/ICSI†.

Are stock buybacks in hospitality firms associated with outstanding executive stock options?

Purpose Outstanding unexercised stock options can motivate managers to engage in actions that increase the value of their company’s stock, including buying back their firm’s stock. The objective of granting stock options to managers is to align their interests with stockholders by tying a portion of their compensation to the company’s stock performance. However, unexercised stock options may have unintended consequences by providing managers with a vested interest in artificially boosting stock prices via stock buybacks. The primary objective of this research is to study the main factors that influence firms' buyback decisions amongst hospitality firms at a time when these firms were clamoring for taxpayer bailouts. Results from logistic regression seem to suggest that outstanding executive stock options are a major contributory factor in a firm’s buyback decision. Estimates also indicate that larger, more profitable firms will likely engage in stock buybacks. These findings survive a battery of tests.Design/methodology/approach The authors use logistic regression to predict the probability of a firm’s buyback decision based on a given set of exogenous explanatory variables.Findings The paper supports the hypothesis that buyback decisions are guided by the motive to prop support stock prices in the presence of outstanding restricted stock options/warrants granted to firms' executives.Research limitations/implications The paper focuses on the buyback decision of U.S. hospitality firms. The results, therefore, might not be generalizable to firms in other industries or countries.Practical implications U.S. share repurchase corporate policy and government regulation needs to be revisited given the economic imperative for firms to invest in activities to restore employment and put them in a position for economic recovery.Social implications Public criticism of the size, structure and form (i.e. loan vs grant) of COVID-19 bailouts warrants an examination of whether the factors that drive hospitality and tourism firms to repurchase shares support economic recovery.Originality/value Consistent with agency theory, the authors find a significant positive association between outstanding restricted stocks and a firm’s decision to support the stock prices by buying back shares.

<p>Bayesian Decision Analysis For Benchmarking Daily And Monthly Time Series</p>

In Business Time Series analysis, daily disaggregation of monthly time series is often needed when adjusting financial series (stock options, swaps, mortgages or other loans). The classical stochastic adjustment methods only allow quarterly or monthly benchmarks to be estimated and can only be applied when high frequency is a regular multiple of low frequency. Thus, they fail to offer solutions for such problems, thereby evidencing the need to develop tools and methods for high-frequency series (daily or weekly ones). This paper obtains the first known method for using daily indicators, taking into account the different number of days for each month. The proposed Bayesian (normal-gamma) method can employ several indicators for the likelihood model, also obtaining an explicit (non iterative) solution for the optimal estimate of high frequency series. It is also important to observe that the model includes a correction mechanism for volatile indicators, as is often found in benchmarking problems for small areas. The methodology, in the line of normal-gamma specifications, allows Bayesian Credibility intervals for the estimated daily series.

Time Series Variation in the Efficacy of Executive Risk-Taking Incentives: The Role of Market-Wide Uncertainty

ABSTRACT Boards of directors encourage risk-averse managers to take risky actions by providing stock options and severance pay. We demonstrate that the ability of these incentives to encourage risk-taking hinges on the level of uncertainty facing the manager. We confirm prior findings that stock option convexity encourages risk-taking but find that this relation only holds when market-wide uncertainty is low. We also confirm prior findings that severance pay encourages risk-taking but find that this relation only holds during high market-wide uncertainty and negative market-wide performance. Finally, we find that compensation committees respond to variation in uncertainty by adjusting the level of option grants. Our results suggest that the effectiveness of incentives to take risk varies with the market-wide uncertainty, and that boards consider this in annual compensation design. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G30; G34; K22; M40; M46.

State-dependent intertemporal risk-return tradeoff: Further evidence

We suggest that the intertemporal risk-return tradeoff is not necessarily positive but rather state dependent. We further explore the state dependent risk-return relation by examining how the positive risk-return relation is distorted in response to various market conditions, including extreme price changes, differing levels of investor sentiment, the introduction of stock options, and throughout business cycles. The tendency for uninformed investors to be optimistic (pessimistic) in response to good (bad) market news cause overpricing (underpricing), and the resulting trade activity of arbitrageurs that distorts the positive risk-return tradeoff, is documented consistently across these environments. We find that the attenuation (reinforcement) of the positive risk-return relation under investors’ optimistic (pessimistic) expectations is stronger in high (low) sentiment periods, in the presence of extreme returns, in the period after stock options became available, and during expansionary periods. We argue that the asymmetric intertemporal risk-return relation is a consequence of rational arbitrageurs’ trading to exploit mispricing through the selling of overpriced stocks conditional on good news and buying underpriced stocks conditional on bad news.