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Article
Repricing and executive turnover
The Financial Review (2007)
  • Narayanan Subramanian, Cornerstone Research
  • Atreya Chakraborty, University of Massachusetts Boston
  • Shahbaz A Sheikh, The University of Western Ontario
Abstract

We examine whether the threat of executive turnover faced by a firm affects its decision to reprice stock options held by its executives. We estimate a model of voluntary turnover among top executives and show that the predicted turnover from this model is positively related to the probability of repricing. The relationship is robust to the inclusion of several known determinants of repricing. Our results are consistent with a model in which a tight labor market makes executives hard to replace, forcing firms to reprice stock options when they go underwater.

Keywords
  • option repricing,
  • executive compensation,
  • incentive compensation,
  • management turnover,
  • CEO turnover
Publication Date
February, 2007
Citation Information
Narayanan Subramanian, Atreya Chakraborty and Shahbaz A Sheikh. "Repricing and executive turnover" The Financial Review Vol. 42 Iss. 1 (2007)
Available at: http://works.bepress.com/shahbaz_sheikh/4/