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Information from Inaction: Vested Options Unexercised and Firm Performance

Dien Giau Bui et al.

Review of Asset Pricing Studies2025https://doi.org/10.1093/rapstu/raaf006article
AJG 3ABDC A*
Weight
0.50

Abstract

We hypothesize that when managers do not exercise their options, they signal valuable private information. Accordingly, we construct a proxy to capture managers’ private information from their in-the-money vested options unexercised (VOU) and find that high VOU firms’ stocks are underpriced. A long-short portfolio based on VOU generates a 5% alpha annually. Additionally, we find a positive relation with subsequent operating performance. Firms with higher VOU also receive more favorable analyst recommendations and upgraded credit ratings. Firms with higher VOU are more likely to issue news releases, share repurchases, and stock splits to convey that private information to the public. (JEL G11, G14, G32, G35, G40)

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https://doi.org/https://doi.org/10.1093/rapstu/raaf006

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@article{dien2025,
  title        = {{Information from Inaction: Vested Options Unexercised and Firm Performance}},
  author       = {Dien Giau Bui et al.},
  journal      = {Review of Asset Pricing Studies},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1093/rapstu/raaf006},
}

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Information from Inaction: Vested Options Unexercised and Firm Performance

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.