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which of the following statements about managerial ownership of stock options and corporate governance is true?

which of the following statements about managerial ownership of stock options and corporate governance is true?

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Answer #1

1) stock options increase in value when stock return volatility increases hence ownership of stock options could incentive the manager to increase firm risk.

2) stock options can be too sensitive to changes in stock price; this could increase the incentive for the manager to engage in fraud simply to try and boost the stock price in the short term.

answered by: Andrew San Andres
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Answer #2

3) stock options are arguably better tool because they are more sensitive to changes in stock price; hence giving the manager a smaller number of dollar-worth of stock options have the same effect as a gift of a larger dollar amount of shares.

answered by: Andrew San Andres
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