Information from Inaction: Vested Options Unexercised and Firm Performance

Dien Giau Bui; Chih-Yung Lin; Tse-Chun Lin

doi:10.1093/rapstu/raaf006

Information from Inaction: Vested Options Unexercised and Firm Performance

Dien Giau Bui¹; Chih-Yung Lin²; Tse-Chun Lin³

¹ College of Management, Yuan Ze University , · ² Department of Information Management and Finance, National Yang Ming Chiao Tung University , · ³ Faculty of Business and Economics, The University of Hong Kong ,

The Review of Asset Pricing Studies 2026

Abstract We hypothesize that when managers do not exercise their options, they signal valuable private information. Accordingly, we construct a proxy to capture managers’ private information from their in-the-money vested options unexercised (VOU) and find that high VOU firms’ stocks are underpriced. A long-short portfolio based on VOU generates a 5% alpha annually. Additionally, we find a positive relation with subsequent operating performance. Firms with higher VOU also receive more favorable analyst recommendations and upgraded credit ratings. Firms with higher VOU are more likely to issue news releases, share repurchases, and stock splits to convey that private information to the public. (JEL G11, G14, G32, G35, G40)

DOI: 10.1093/rapstu/raaf006
Volume: 16 (2)
Pages: 203-240
Language: en
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