Consequences of backdating stock options adult dating services chelsea vermont

The Wall Street Journal (see discussion of article below) pointed out a CEO option grant dated October 1998.The number of shares subject to option was 250,000 and the exercise price was (the trough in the stock price graph below.) Given a year-end price of , the intrinsic value of the options at the end of the year was (-) x 250,000 = ,750,000.Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.An example illustrates the potential benefit of backdating to the recipient.

In a study that I started in 2003 and disseminated in the first half of 2004 and that was published in Management Science in May 2005 (available at I found that stock prices also tend to decrease before the grants.ESOs are usually granted at-the-money, i.e., the exercise price of the options is set to equal the market price of the underlying stock on the grant date.Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.Furthermore, the pre-and post-grant price pattern has intensified over time (see graph below).By the end of the 1990s, the aggregate price pattern had become so pronounced that I thought there was more to the story than just grants being timed before corporate insiders predicted stock prices to increase.

Search for consequences of backdating stock options:

consequences of backdating stock options-53consequences of backdating stock options-63

Unless corporate insiders can predict short-term movements in the stock market, my results provided further evidence in support of the backdating explanation.

Leave a Reply

Your email address will not be published. Required fields are marked *

One thought on “consequences of backdating stock options”

  1. On 4/3/1974, a category F5 tornado 27.3 miles away from the town center killed 16 people and injured 190 people. Major Disasters (Presidential) Declared: 11Emergencies Declared: 5Causes of natural disasters: Floods: 7, Storms: 7, Tornadoes: 6, Hurricanes: 4, Winds: 3, Freezes: 2, Winter Storms: 2, Drought: 1, Ice Storm: 1, Snowfall: 1 (Note: Some incidents may be assigned to more than one category). Religion Census: Religious Congregations & Membership Study. Congregations and Membership in the United States 2000.