The effect of stock option repricing on employee turnover

• Published in: Journal of accounting & economics Vol. 37; no. 1; pp. 91 - 112
• Main Authors: Carter, Mary Ellen, Lynch, Luann J.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-02-2004; Elsevier; Elsevier Sequoia S.A
• Series: Journal of Accounting and Economics
• Subjects: Accounting; Changes; Compensation; Correlation analysis; Economics; Employee retention; Employee turnover; Executive compensation; Executives; Labour turnover; Options on stocks; Stock option repricing; Stock options; Stock prices; Studies; United States > US; Employee retention; J63; Employee turnover; M41; J33; M52; Executive compensation; Stock option repricing
• ISSN: 0165-4101; 1879-1980
• DOI: 10.1016/j.jacceco.2003.06.002

We examine whether repricing underwater stock options reduces executive and overall employee turnover using a sample of firms that reprice stock options in 1998 and a sample of firms with underwater stock options that choose not to reprice. We find little evidence that repricing affects
executive turnover. However, using forfeited stock options to proxy for
overall employee turnover, we find that 1999 employee turnover is negatively related to the 1998 repricing, suggesting that repricing helps prevent turnover due to underwater options. We find no evidence that the relation between turnover and repricing differs between high technology and nonhigh technology firms.