Unintended Consequences: Information Releases and CEO Stock Option Grants

Scholars, regulators, and practitioners have long struggled with challenges emanating from the separation of ownership and control of modern corporations. Agency theory typically prescribes the use of stock options, or other outcome-based contractual arrangements, to overcome the critical issue of information asymmetry. We theorize that this arrangement, which leaves information asymmetry in place, provides CEOs an informational advantage that...