Exercise Price of Executive Stock Option and Executive Opportunism in China Listed Companies

Adding stock option to management compensation portfolio is an effective mechanism in aligning the interests of managers with those of shareholders. But this mechanism may be noneffective since the self-dealing opportunism of managers. This thesis analyses the managers will undertake self-dealing opportunities by choosing time and content of information disclosure to affect the exercise price of stock option. Taking the listed companies of China, which initially disclose stock option incentive plan as study subject, and using the events study approach to compute cumulated abnormal returns, I observe a significant decline in stock price before top executives receive the award and a significant increase in stock price shortly after the incentive plans disclosure.