CEO compensation and timing of Executive Stock Option exercises
by Ahmad Ibn Ibrahimy; Rubi Ahmad
International Journal of Business Governance and Ethics (IJBGE), Vol. 8, No. 2, 2013

Abstract: This study examines the relationship between Executive Stock Option (ESO) exercise and firm performance in Malaysia for the period 2002-2008. We found a significant positive relationship between ESO exercise and firm performance for both market and accounting-based performance measures using data on ESO exercising from 201 non-financial companies. Our panel data analysis of fixed effect estimation indicated that Malaysian executives are most likely to exercise their options immediately after they are granted; suggesting intended behaviour of adopting ESOs rather than maximising the shareholders' wealth as governance mechanism. This early exercise pattern of Malaysian executives also indicates that executives are averse to the risk.

Online publication date: Wed, 02-Oct-2013

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