Corporate governance research often focuses on two theoretical stands, agency theory and resource dependence theory. Whist both provide distinct theoretical roles, this paper combines them to argue that executive stock option plans (ESOs) can serve a dual role, that of re-alignment of managers’ and shareholders’ interests, and board stability, by ‘locking’ the executive to reward and thus retaining managerial talent. The paper focuses on a unique sample of 311 entrepreneurial initial public offerings. It examines their choice of schemes prior to and at the initial public offering (IPO). It gives consideration to ESO choices being associated with board ownership, executive wealth and cognitive characteristics of the IPO firm’s management team. Finally, it examines performance in line with signalling theory, showing that IPO underpricing is reduced by the presence of executive stock options and that high growth positively moderates the link between underpricing and conditional ESO plans
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