Read “Does backdating explain the stock price pattern around executive stock option grants?”
6. Lie (2005) points out that stock returns attributable to market factors is negative before option grants and positive afterward. Why does this rule out (or question) the conclusion of prior studies that managers opportunistically time the release of information around grant dates?
7. What are “scheduled” stock option grants? Why is timing less of an issue with scheduled grants?
8. What is “backdating” of stock option grants? Explain why (and how) companies and employees receiving stock options benefit from backdating.
9. Prior to Sarbanes-Oxley, what was the reporting deadline for executive stock option grants?
10. What was the change in reporting requirements after Sarbanes-Oxley (SOX)? Did the change reduce firms’ abilities to backdate stock options?
11. Based on this study, how do the authors establish (or try to convince the reader) that backdating is the most likely explanation for the abnormal return patterns documented in prior studies?
12. Is there a tax violation when stock options are backdated? Explain.
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