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Information asymmetry, contract design and process of negotiation: The stock options awarding case

dc.contributor.authorDeffains-Crapsky, Catherine
dc.contributor.authorde La Bruslerie, Hubert
dc.date.accessioned2014-01-29T10:36:09Z
dc.date.available2014-01-29T10:36:09Z
dc.date.issued2008-04
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/12534
dc.language.isoenen
dc.subjectOptimal incentive contracten
dc.subjectStock-optionsen
dc.subjectAsymmetry of informationen
dc.subjectNegotiationen
dc.subjectManagerial poweren
dc.subject.ddc332en
dc.subject.classificationjelK2en
dc.subject.classificationjelG35en
dc.subject.classificationjelG3en
dc.titleInformation asymmetry, contract design and process of negotiation: The stock options awarding caseen
dc.typeArticle accepté pour publication ou publié
dc.contributor.editoruniversityotherUniversité d'Angers;France
dc.description.abstractenStock option plans are used to increase managerial incentives, and business practices usually set the exercise price equal to the stock market price. The purpose of this paper is to underline the importance of a process of negotiation leading to a possible equilibrium contract satisfying both managers and shareholders. The two key variables of the model are the percentage of equity capital offered by the shareholders to the managers and the exercise price of the options that may be at a discount. We explicitly introduce risk aversion and information asymmetries in the form of (i) an economic uncertainty in the gain of cash flow, (ii) possibly biased information between the two parties and (iii) a noise in the valuation price of the stock in the market. The existence of a process of negotiation between shareholders and managers leading to a possible disclosure of private information is highlighted. As a conclusion, we show that “efficient” stock option plans should be granted in a context of trade-off between the percentage of capital awarded to managers and the discount in stock price.en
dc.relation.isversionofjnlnameJournal of corporate finance
dc.relation.isversionofjnlvol14en
dc.relation.isversionofjnlissue2en
dc.relation.isversionofjnldate2008-04
dc.relation.isversionofjnlpages73-91en
dc.relation.isversionofdoihttp://dx.doi.org/10.1016/j.jcorpfin.2008.01.001en
dc.relation.isversionofjnlpublisherElsevieren
dc.subject.ddclabelEconomie financièreen
dc.relation.forthcomingnonen
dc.relation.forthcomingprintnonen


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