Revisiting the incentive effects of executive stock options

► We develop a multiperiod framework to revisit the incentive effects of executive stock options. ► We consider the impacts of changes in the grant-date firm stock price on total option values at the vesting date. ► The firm should not always fix the strike price to the grant-date stock price. ► The firm could grant restricted stock if the vesting period is short or at-the-money options if the vesting period is long.