Abnormal Returns on Employee Stock Option Grants: An Event Study on Stockholm Stock Exchange

Ermin Keric & Mia Vale Sæter

Student thesis: Master thesis


The objective of this thesis is to investigate if there exists a statistically significant abnormal return on employee stock option grants for Swedish listed firms. If so, this could be ani ndication of corporate insiders systematically using private information to manipulate the granting of employee stock options. The study complements previous research as it is conducted in a different institutional conext than the Anglo-American predominantly examined. Out of several discrepancies it can be mentioned that the Swedish market is characterized by a concentraded ownership structure and a different juristdictional tradition.In addition to this our study will also test if there is any relation between six chosen corporate governance determinants and the cumulative abnormal return on the grants. The corporate governance determinants studied includes firm size, listing age, CEO tenure,technology intensity, prior stock performance and proportion of voting rights held by the largest shareholder. Further, we also investigate how the 2008 financial crisis has affected the cumulative abnormal return on employee stock options in Sweden. The empirical findings are based on a data sample containting 517 stock option grants occurring between January 1st, 2006 and Decemeber 31th, 2015. The results show no significant findings of an abnormal return pattern on employee stock option grants for insiders in Swedish listed firms. However, our study does find a significant negative relationship between two corporate governance variables, voting rights and priorperformance, and the cumulative abnormal return around the option grants. Supprisingly we also find a significant increase in abnormal returns after the financial crisis irrespective of increased regulations.

EducationsMSc in Finance and Investments, (Graduate Programme) Final ThesisMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2016
Number of pages98
SupervisorsCaspar Rose