Incentives, targeting, and firm performance: An analysis of non-executive stock options

Yael V. Hochberg, Laura Lindsey

Research output: Contribution to journalArticlepeer-review

102 Scopus citations


We examine whether options granted to non-executive employees affect firm performance. Using new data on option programs, we explore the link between broad-based option programs, option portfolio implied incentives, and firm operating performance, utilizing an instrumental variables approach to identify causal effects. Firms whose employee option portfolios have higher implied incentives exhibit higher subsequent operating performance. Intuitively, the implied incentive-performance relation is concentrated in firms with fewer employees and in firms with higher growth opportunities. Additionally, the effect is concentrated in firms that grant options broadly to non-executive employees, consistent with theories of cooperation and mutual monitoring among co-workers.

Original languageEnglish (US)
Pages (from-to)4148-4186
Number of pages39
JournalReview of Financial Studies
Issue number11
StatePublished - Nov 2010

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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