{'fraction_non_alphanumeric': 0.013670256835128418, 'fraction_numerical': 0.0016570008285004142, 'mean_word_length': 5.1923076923076925, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Stock Option Timing: Investigation and Implication

Companies grant compensatory option awards to provide retention and long term value creation incentives, aligning long term interests of shareholders and managers. The options issued by publicly traded companies in the US tend to be similar in design. Generally, the options are issued pursuant to a shareholder approved stock option plan, have an exercise price equal to the fair market value of the stock on the date of grant, become exercisable over a period of time, and expire at a fixed point in time after the date of grant. Academic work, bolstered by the financial press, has provided a body of evidence that suggests that many companies have issued options at prices below the market price at the date of grant. Such conduct, while not necessarily illegal, could give rise to a series of issues which have ranged from the grant of immediate compensation as opposed to retention and incentive compensation, to violating a corporation's stock option plan, to the improper corporate disclosure of compensation and therefore earnings, ultimately resulting in potential violations of tax and securities laws. These concerns have cast both ethical and legal clouds over many companies. This paper will review the recent academic literature on the topic of stock option backdating. It is clear that several academicians were instrumental in providing the early insight into this practice that has led to the public scandal. While the literature will show that the Sarbanes-Oxley Act of 2002 (SOX) has had a substantial effect in altering certain stock option practices it will also highlight that there are still a number of open issues needing the attention of corporate boards of directors. The academic work reviewed in this paper focuses on stock option grant manipulations of various types and their implications. Such manipulations include information timing, backdating of stock option grant dates and altering the exercise dates of stock options. The literature reviewed also discusses the economic impact of such events, including different means of calculating the manipulation of these grants, and the loss of overall market capitalization of the implicated firms. Other papers focus on director grants that are associated with opportunistic timing and the migration of backdating across firms due to board interlocks and weak corporate governance.