Browsing by Author "Lie, Erik"

Now showing 1 - 3 of 3
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    Do Stock Options Overcome Managerial Risk Aversion? Evidence from Exercises of Executive Stock Options
    (2016) Heron, Randall A.; Lie, Erik; Kelley School of Business
    We report that the probability that executives exercise options early decreases with the volatility of the underlying stock return. We interpret this to mean that executives’ subjective option value increases with volatility and that option grants increase executives’ risk appetite. Further decomposition reveals that the results are most pronounced for idiosyncratic volatility, consistent with our conjecture that executives believe they can better predict or influence the resolution of idiosyncratic uncertainty than systematic uncertainty and, thus, favor the former.
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    The Effect of Poison Pill Adoptions and Court Rulings on Firm Entrenchment
    (Elsevier, 2015-12) Heron, Randall A.; Lie, Erik; Kelley School of Business
    We challenge a common presumption that poison pills and two Delaware case rulings in 1995 validating such pills materially entrench firms. Based on unsolicited takeover attempts from 1985 to 2009, we find that poison pills enhance takeover premiums, but do not reduce completion rates. Furthermore, the 1995 Delaware rulings affected neither the use of poison pills among the targets, the effectiveness of the pills that were used, the completion rate of the takeover attempts, nor the takeover premiums.
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    Option grant backdating investigations and capital market discipline
    (2009-12) Carow, Kenneth A.; Heron, Randall A,; Lie, Erik; Neal, Robert
    Using a large sample of option granting firms, some of which were investigated for option grant backdating, we develop a predictive model for such investigations and examine how the capital market responded as the backdating scandal unfolded. Firms that were investigated experienced significant stock price declines from the beginning of the Wall Street Journal's Perfect Payday series through the end of 2006. Firms predicted to have backdating problems, but not the subject of publicly revealed investigations, experienced stock price performance during the same period that was remarkably similar to that of firms with publicly revealed investigations. In contrast, firms not predicted to have backdating problems experienced normal stock price performance. Our results suggest that capital markets disciplined companies with suspicious option grant histories, often prior to, and irrespective of, any public revelation of an investigation into the matter.