We gather data from 77 current mid-level managers and 111 future entry-level managers, to investigate how they value stock options and restricted stock. We refer to our current and future manager groups collectively as quot;managers.quot; We supplement our manager data with a dozen field...

A distinctive feature of stock options is that they create incentives for managers to take risks. For a sample of 6,439 CEO-year observations over 1992-1999, we find that risk-taking incentives offered by CEO's stock options (the sensitivity of ESO values to stock return volatility) are...

We estimate the relation between top 5 executive stock option (ESO) grants and future earnings to examine whether incentive alignment or rent extraction by top managers explains option granting behavior. The future operating income associated with a dollar of Black-Scholes value of an ESO grant...

Although agency theory suggests that firms ought to index executive compensation to remove market-wide effects (i.e., RPE), there is little evidence to support this theory. Oyer (2004) posits that absence of RPE is optimal if the CEO's reservation wages from outside employment opportunities rise...

Sloan (1996) and several follow up papers show that the stock market behaves as though it cannot understand the implications of accruals for future earnings. We propose and find evidence consistent with the hypothesis that risk-averse arbitrageurs are unable to eliminate accrual related...

Although agency theory suggests that firms ought to index executive compensation to remove market-wide effects (i.e., RPE), there is little evidence to support this theory. Oyer (2004) posits that absence of RPE is optimal if the CEO's reservation wages from outside employment opportunities rise...

We show that the accrual anomaly documented by Sloan (1996) is concentrated in firms with high idiosyncratic stock return volatility making it risky for risk-averse arbitrageurs to take positions in stocks with extreme accruals. Moreover, the accrual anomaly is found in low price and low volume...

We estimate the relation between stock option (ESO) grants to the top five executives and future earnings to examine whether incentive alignment or rent extraction by top managers explains option granting behavior. The future operating income associated with a dollar of Black-Scholes value of an...

Although leading indicators are becoming increasingly important for equity valuation, disclosures of such indicators suffer from the absence of GAAP related guidance on content and presentation. We explicitly examine (i) whether one leading indicator - order backlog - predicts future earnings,...

We examine whether executive stock options (ESOs) provide managers with incentives to invest in risky projects. For a sample of oil and gas producers, we examine whether the coefficient of variation of future cash flows from exploration activity (our proxy for exploration risk) increases with...