Stock options: From backdating to spring loading

• The introduction of the Sarbanes-Oxley Act (SOX) in 2002 and the Security and Exchange Commission's implementation of the Act in 2006 ended the practice of backdating options.
• The practice of backdating was substituted with the practice of “spring loading” options around analysts’ price targets announcements.
• Analysts’ price targets constitute a new indicator to measure spring loading.
• The evidence provide further insight into the current debate regarding managerial compensation.

In this article I explore the impact of the introduction of the Sarbanes–Oxley Act (SOX) in 2002 and the Securities and Exchange Commission's implementation of the Act in 2006 on the options granting process. I show that after the introduction of the SOX and its implementation the practice of backdating options was substituted with the practice of “spring loading” options around analysts’ price targets announcements.