Employee behavior may effect valuation of employee stock options

Study examines the degree to which employees' early option exercise behavior affects firms' employee stock option valuation estimates.

In contrast to prior research, study shows that employee stock option value estimates differ when exercise rates are modeled as a function of factors such as attainment of performance benchmarks, recent vesting, portfolio value, and employee rank.

Article: "Timing of Employee Stock Option Exercises and the Valuation of Stock Option Expense"

Authors: CHRIS S. ARMSTRONG, Stanford Graduate School of Business
Email: carmstro@stanford.edu
Co-Author: ALAN D. JAGOLINZER, Stanford Graduate School of Business, Email: jagolinzer@stanford.edu
Contact: DAVID F. LARCKER, Stanford Graduate School of Business, Email: Larcker_David@gsb.stanford.edu