TY  - JOUR
AU  - Bebchuk,Lucian A.
AU  - Grinstein,Yaniv
AU  - Peyer,Urs
TI  - Lucky Directors
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12811
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12811
L1  - http://www.nber.org/papers/w12811.pdf
N1  - Author contact info:
Lucian A. Bebchuk
Harvard Law School
1545 Massachusetts Avenue
Cambridge, MA 02138
Tel: 617/495-3138
Fax: 617/812-0554
E-Mail: bebchuk@law.harvard.edu

Yaniv Grinstein
Johnson Graduate School of Management
Cornell University
371 Sage Hall
Ithaca, NY 14853
Tel: 607/255-257-6201
E-Mail: yg33@cornell.edu

Urs Peyer
INSEAD - Finance
Boulevard de Constance
F-77305 Fontainebleau Cedex  FRANCE
E-Mail: urs.peyer@insead.edu
AB  - While prior empirical work and much public attention have focused on the opportunistic timing of executives' grants, we provide in this paper evidence that outside directors' option grants have also been favorably timed to an extent that cannot be fully explained by sheer luck. Examining events in which public firms granted options to outside directors during 1996-2005, we find that 9% were "lucky grant events" falling on days with a stock price equal to a monthly low. We estimate that about 800 lucky grant events owed their status to opportunistic timing, and that about 460 firms and 1400 outside directors were associated with grant events produced by such timing. There is evidence that the opportunistic timing of director grant events has been to a substantial extent the product of backdating and not merely spring-loading based on private information. We find that directors' luck has been correlated with executives' luck. Furthermore, grant events were more likely to be lucky when the firm had more entrenching provisions protecting insiders from the risk of removal, as well as when the board did not have a majority of independent directors.
ER  -