Study on the Market Reaction of Stock Option of Listed Companies in China

Abstract

Stock option is a useful means to motivate the management to increase their efficiency and effectiveness. This paper investigates the market reaction during the period before and after the announcement date, taking the list Corporations which have announced option plans in Shanghai and Shenzhen stock markets from January 1, 2011 to September 21, 2012 as samples for event study. Through the event study and T-test, we find that there are positive market responses to the announcement of stock option plans to the management in China. Our research is of importance to both investors and listed companies.