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Information distribution within firms: evidence from stock option exercises

Steven Huddart and Mark Lang

We examine the stock option Exercise decisions of over 50,000 employees at seven corporations to provide evidence on the distribution of price-relevant non-public information among employees. When option exercise (adjusted for other factors affecting exercise) is low, stock returns in the coming six months are 10% higher than when option exercise is high. The exercise decisions of relatively junior employees contain at least as much price-relevant information as the exercise decisions of more senior employees.

JEL Classification: D82 G28 J33 K22

Keywords: accounting, compensation, disclosure, regulation, securities

Journal of Accounting & Economics Volume 34, Nos. 1-3 (January 2003) 3-31

Download a pre-publication version of the paper from SSRN.

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Steven Huddart
Smeal College of Business, Penn State University, University Park, PA 16802-3603 USA
(814) 865-3271
(814) 863-8393 fax
huddart@psu.edu
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