Taxes and the backdating of stock option exercise dates

Dan Dhaliwal, Merle Erickson, Shane Heitzman

Research output: Contribution to journalArticlepeer-review

26 Scopus citations


We investigate the backdating of stock option exercises. Before SOX, we find evidence that some exercises were backdated to days with low stock prices. Consistent with a tax-based incentive, these suspect exercises are more likely when the personal tax savings from backdating are higher. However, suspect CEO exercises generate average (median) estimated tax savings of $96,000 ($7,000). These savings appear modest relative to the costs insiders and firms face. We find that the likelihood of a suspect exercise increases in the likelihood of option grant backdating. This suggests that agency problems associated with backdating permeate option compensation in some firms.

Original languageEnglish (US)
Pages (from-to)27-49
Number of pages23
JournalJournal of Accounting and Economics
Issue number1-2
StatePublished - Mar 2009
Externally publishedYes


  • Backdating
  • Insider trading
  • Regulation
  • Stock option compensation
  • Taxes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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