Employee Stock Option Exercise and Firm Cost

This paper is the first to perform a comprehensive estimation of employee stock option ex- ercise behavior and option cost to firms. We develop a GMM-based methodology, robust to heteroskedasticity and correlation across exercises, for estimating the rate of voluntary option exercise as a function of the stock price path and of various firm and option holder character- istics. We use it to estimate an exercise function for a sample of 1.3 million employee-option grants to 530,266 employees at 103 publicly-traded firms between 1981–2009. We use the estimated exercise functions in a simulation based valuation model to analyze the effect of different firm and option characteristics on option value, and show that the Black-Scholes- based methods used in practice can create systematic biases.

本文首次对员工股票期权的行权行为以及公司的期权成本进行了全面估算。我们开发了一种基于广义矩估计（GMM）的方法，该方法对异方差性和行权之间的相关性具有稳健性，用于估算自愿行权率作为股票价格路径以及各种公司和期权持有者特征的函数。我们用它来估算1981 - 2009年间103家上市公司向530,266名员工授予的130万个员工期权样本的行权函数。我们在一个基于模拟的估值模型中使用估算出的行权函数来分析不同公司和期权特征对期权价值的影响，并表明实践中使用的基于布莱克 - 斯科尔斯（Black - Scholes）的方法可能会产生系统性偏差。