The Incentive Effect of Repricing in Employee Stock Options. (Sorthwestern Finance Association Best Paper in Corporate Finance, 2007)
published: 2009 | Research publication | Refereed Journals
Wu. Y., (2009). “The Incentive Effect of Repricing in Employee Stock Options.” Review of Accounting and Finance, Vol. 8, No. 1, 38-53
ABSTRACT: This paper develops an intensity-based model that reflects the special features of repriceable employee stock options (ESOs). The model is used to assess shareholder cost of repriceable ESOs, to explore their early exercise pattern and to compare their incentive effect with standard ESOs. Two main conclusions arise. First, option holders of repriceable ESOs postpone their exercise before repricing. But once the exercise price has been reset, option holders are more likely to exercise ESOs early. Second, option repricing is less cost-effective than standard options in providing incentives.
revised Dec 8/09
View all Wendy Wu documents