{"id":{"repo_id":"lsu-thes","oai_identifier":"oai:repository.lsu.edu:gradschool_dissertations-2179"},"canonical_url":"https://search.dev.ndltd.org/etd/lsu-thes/oai:repository.lsu.edu:gradschool_dissertations-2179","repository":{"repo_id":"lsu-thes","name":"Lousiana State University","base_url":"https://repository.lsu.edu/do/oai/"},"display":{"title":"Managerial ability and the valuation of executive stock options","abstract":"The executive compensation literature argues that executives generally value stock options at less than market value because of suboptimal ownership and risk aversion. Implicit in this finding is the assumption that executives are, like shareholders, price takers. That is, they have no ability to influence the outcomes of the firm’s investments. Clearly, executives do have the ability to influence these outcomes, because that is the purpose of granting them the options. In this paper, we develop a model in which managers can exert effort and alter the distribution of the returns from the firm’s investments. We find that when executives choose their optimal effort, the values of their options are much higher than generally thought and potentially higher than the market values of the options. In empirical evidence, we show that firms having better stock performance use stock options more efficiently. In addition, the pay-for-performance sensitivity is also stronger among these firms. Therefore, we conclude that the manager’s ability plays an important role in the abnormal performance.","abstract_html":"The executive compensation literature argues that executives generally value stock options at less than market value because of suboptimal ownership and risk aversion. Implicit in this finding is the assumption that executives are, like shareholders, price takers. That is, they have no ability to influence the outcomes of the firm’s investments. Clearly, executives do have the ability to influence these outcomes, because that is the purpose of granting them the options. In this paper, we develop a model in which managers can exert effort and alter the distribution of the returns from the firm’s investments. We find that when executives choose their optimal effort, the values of their options are much higher than generally thought and potentially higher than the market values of the options. In empirical evidence, we show that firms having better stock performance use stock options more efficiently. In addition, the pay-for-performance sensitivity is also stronger among these firms. Therefore, we conclude that the manager’s ability plays an important role in the abnormal performance.","abstract_has_math":false,"creators":["Yang, Tung-Hsiao"],"institution":"Finance (Business Administration)","degree_name":"Doctor of Philosophy (PhD)","degree_level":"Dissertation","degree_discipline":"Finance and Financial Management","degree_department":null,"school":null,"contributors":[],"advisors":[],"committee_chairs":[],"committee_members":[],"year":2007,"date_issued":"2007-01-01T08:00:00Z","date_published":"2007-01-01T08:00:00Z","updated_at":"2026-07-24T02:59:03Z","subjects":["managerial effort","expected utility","managerial ability","executive compensation","stock option"],"languages":[],"rights":["unrestricted","Release the entire work immediately for access worldwide."],"rights_urls":[],"identifier_entries":[{"key":"dc:identifier","label":"Identifier","values":["etd-03302007-004530","https://repository.lsu.edu/gradschool_dissertations/1180"],"render_values":[{"text":"etd-03302007-004530","href":null,"code":true},{"text":"https://repository.lsu.edu/gradschool_dissertations/1180","href":"https://repository.lsu.edu/gradschool_dissertations/1180","code":true}]}]},"links":{"outbound_url":"https://doi.org/10.31390/gradschool_dissertations.1180","outbound_label":"DOI","outbound_source":"dc:identifier"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:creator","label":"Author","values":["Yang, Tung-Hsiao"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date","label":"Dc Date","values":["2007-03-22"]},{"key":"dc:date.available","label":"Dc Date Available","values":["2022-05-12T23:11:17Z"]},{"key":"thesis:degree_discipline","label":"Discipline","values":["Finance and Financial Management"]},{"key":"thesis:degree_level","label":"Degree Level","values":["Dissertation"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Doctor of Philosophy (PhD)"]},{"key":"thesis:institution_name","label":"Thesis Institution Name","values":["Finance (Business Administration)"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["managerial effort","expected utility","managerial ability","executive compensation","stock option"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:rights","label":"Dc Rights","values":["unrestricted","Release the entire work immediately for access worldwide."]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier","label":"Identifier","values":["etd-03302007-004530","10.31390/gradschool_dissertations.1180","https://repository.lsu.edu/gradschool_dissertations/1180"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["The executive compensation literature argues that executives generally value stock options at less than market value because of suboptimal ownership and risk aversion. Implicit in this finding is the assumption that executives are, like shareholders, price takers. That is, they have no ability to influence the outcomes of the firm’s investments. Clearly, executives do have the ability to influence these outcomes, because that is the purpose of granting them the options. In this paper, we develop a model in which managers can exert effort and alter the distribution of the returns from the firm’s investments. We find that when executives choose their optimal effort, the values of their options are much higher than generally thought and potentially higher than the market values of the options. In empirical evidence, we show that firms having better stock performance use stock options more efficiently. In addition, the pay-for-performance sensitivity is also stronger among these firms. Therefore, we conclude that the manager’s ability plays an important role in the abnormal performance."]},{"key":"dc:title","label":"Title","values":["Managerial ability and the valuation of executive stock options"]}]}],"canonical_facts":{"dc:creator":["Yang, Tung-Hsiao"],"dc:date":["2007-03-22"],"dc:date.available":["2022-05-12T23:11:17Z"],"dc:description.abstract":["The executive compensation literature argues that executives generally value stock options at less than market value because of suboptimal ownership and risk aversion. Implicit in this finding is the assumption that executives are, like shareholders, price takers. That is, they have no ability to influence the outcomes of the firm’s investments. Clearly, executives do have the ability to influence these outcomes, because that is the purpose of granting them the options. In this paper, we develop a model in which managers can exert effort and alter the distribution of the returns from the firm’s investments. We find that when executives choose their optimal effort, the values of their options are much higher than generally thought and potentially higher than the market values of the options. In empirical evidence, we show that firms having better stock performance use stock options more efficiently. In addition, the pay-for-performance sensitivity is also stronger among these firms. Therefore, we conclude that the manager’s ability plays an important role in the abnormal performance."],"dc:identifier":["etd-03302007-004530","10.31390/gradschool_dissertations.1180","https://repository.lsu.edu/gradschool_dissertations/1180"],"dc:rights":["unrestricted","Release the entire work immediately for access worldwide."],"dc:subject":["managerial effort","expected utility","managerial ability","executive compensation","stock option"],"dc:title":["Managerial ability and the valuation of executive stock options"],"thesis:degree_discipline":["Finance and Financial Management"],"thesis:degree_level":["Dissertation"],"thesis:degree_name":["Doctor of Philosophy (PhD)"],"thesis:institution_name":["Finance (Business Administration)"]},"updated_at":"2026-07-24T02:59:03Z"}