Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia
Separation of ownership and control creates the necessity of corporate governance mechanisms, such as Executive Stock Option Scheme (ESOs), which reduce the conflicts of interests between managers and shareholders. In spite of the fact that shareholders exercise their option when it is in the money...
| Main Authors: | , |
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| Format: | Conference or Workshop Item |
| Language: | English |
| Published: |
2012
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| Online Access: | http://eprints.um.edu.my/13973/1/113_333_3rdICBER2012_Proceeding_PG1627_1633.pdf |
| _version_ | 1825720448185270272 |
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| author | Ibrahimy, A.I. Ahmad, R. |
| author_facet | Ibrahimy, A.I. Ahmad, R. |
| author_sort | Ibrahimy, A.I. |
| collection | UM |
| description | Separation of ownership and control creates the necessity of corporate governance mechanisms, such as Executive Stock Option Scheme (ESOs), which reduce the conflicts of interests between managers and shareholders. In spite of
the fact that shareholders exercise their option when it is in the money, this study attempts to explore the properties of option exercising behavior by executives to verify any differences of trading patterns in terms of ESO granting and
exercising. In the presence of concentrated ownership coupled with poor corporate governance structure in Malaysia, executives might have control over management compensation plan to benefit them rather than maximizing wealth of the corporations. Using data on ESO granting and exercising from 201 non-financial companies, this paper aims to recognize the pattern of ESO exercises by Malaysian executives affecting firm performance. We found that Malaysian companies are granting their ESO when market is overvalued. We also found a significant positive relationship between ESO exercising and firm performance for both market and accounting based performance measures. Panel
data analysis of fixed effect estimation revealed the fact that Malaysian executives exercise their option immediately
after they are granted; suggesting intended behavior of adopting ESOs. |
| first_indexed | 2024-03-06T05:35:18Z |
| format | Conference or Workshop Item |
| id | um.eprints-13973 |
| institution | Universiti Malaya |
| language | English |
| last_indexed | 2024-03-06T05:35:18Z |
| publishDate | 2012 |
| record_format | dspace |
| spelling | um.eprints-139732015-08-22T06:12:27Z http://eprints.um.edu.my/13973/ Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia Ibrahimy, A.I. Ahmad, R. HG Finance Separation of ownership and control creates the necessity of corporate governance mechanisms, such as Executive Stock Option Scheme (ESOs), which reduce the conflicts of interests between managers and shareholders. In spite of the fact that shareholders exercise their option when it is in the money, this study attempts to explore the properties of option exercising behavior by executives to verify any differences of trading patterns in terms of ESO granting and exercising. In the presence of concentrated ownership coupled with poor corporate governance structure in Malaysia, executives might have control over management compensation plan to benefit them rather than maximizing wealth of the corporations. Using data on ESO granting and exercising from 201 non-financial companies, this paper aims to recognize the pattern of ESO exercises by Malaysian executives affecting firm performance. We found that Malaysian companies are granting their ESO when market is overvalued. We also found a significant positive relationship between ESO exercising and firm performance for both market and accounting based performance measures. Panel data analysis of fixed effect estimation revealed the fact that Malaysian executives exercise their option immediately after they are granted; suggesting intended behavior of adopting ESOs. 2012-03 Conference or Workshop Item PeerReviewed application/pdf en http://eprints.um.edu.my/13973/1/113_333_3rdICBER2012_Proceeding_PG1627_1633.pdf Ibrahimy, A.I. and Ahmad, R. (2012) Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia. In: International Conference on Business and Economic Research, 12-13 March 2012, Bandung, Indonesia. |
| spellingShingle | HG Finance Ibrahimy, A.I. Ahmad, R. Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia |
| title | Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia |
| title_full | Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia |
| title_fullStr | Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia |
| title_full_unstemmed | Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia |
| title_short | Market timing of executive stock option granting and exercising: Evidence from bursa Malaysia |
| title_sort | market timing of executive stock option granting and exercising evidence from bursa malaysia |
| topic | HG Finance |
| url | http://eprints.um.edu.my/13973/1/113_333_3rdICBER2012_Proceeding_PG1627_1633.pdf |
| work_keys_str_mv | AT ibrahimyai markettimingofexecutivestockoptiongrantingandexercisingevidencefrombursamalaysia AT ahmadr markettimingofexecutivestockoptiongrantingandexercisingevidencefrombursamalaysia |