Are managers more inclined to split their shares if they stand to
personally benefit from them? The greater the variable compensation
in the remuneration package, i.e., the more a compensation package
represents a "call" option on the stock; the more
inclined CEOs are to split the firms' shares. Accompanied by
the increase in stock price and volatility subsequent to a stock
split, CEOs can increase the value of their option packages by
splitting the firm's shares as it sends a credible signal to
the market. By focusing on stock option exercise behaviour of CEOs
I provide initial evidence that executives use the stock split to
time option exercises.
The author holds an BSC degree in international business with a finance direction obtained from the University of Maastricht and Hong Kong University of Science and Technology. After this he obtained his MSC in Finance at the University of Maastricht
