Research Purpose: This study examines whether the stock-price sensitivity (Delta) and volatility
sensitivity (Vega) of outstanding employee stock option portfolios are associated with subsequent
ESG ratings among Korean listed firms disclosing unexercised options.
Research Methods: Using 253 firm-year observations for 115 firms during 2022–2024, the study
estimates portfolio Delta and Vega following Core and Guay (2002). It analyzes next-year KCGS
composite and pillar ratings using rating-level regressions, current-rating controls, rating-change
models, ordered logit, and firm fixed-effects.
Results in Research: Delta is not significant in the baseline models. Vega is positively associated
with next-year composite, social, and governance ratings, but not environmental ratings. The
composite association is not significant in the current-rating sample or in models controlling for
current ratings or rating changes; in these models, Vega is negatively associated with environmental
ratings. Ordered-logit results are similar to the baseline, whereas firm fixed-effects estimates show
positive associations for composite and social ratings and a borderline positive association for
environmental ratings, but not governance.
Research Conclusion: Overall, the association between Vega and ESG ratings is specification-dependent.
The results therefore do not establish causality or a consistent positive relation with one-year rating
changes and apply only to firms disclosing outstanding stock options.
Research Purpose: This study examines whether the stock-price sensitivity (Delta) and volatility
sensitivity (Vega) of outstanding employee stock option portfolios are associated with subsequent
ESG ratings among Korean listed firms disclosing unexercised options.
Research Methods: Using 253 firm-year observations for 115 firms during 2022–2024, the study
estimates portfolio Delta and Vega following Core and Guay (2002). It analyzes next-year KCGS
composite and pillar ratings using rating-level regressions, current-rating controls, rating-change
models, ordered logit, and firm fixed-effects.
Results in Research: Delta is not significant in the baseline models. Vega is positively associated
with next-year composite, social, and governance ratings, but not environmental ratings. The
composite association is not significant in the current-rating sample or in models controlling for
current ratings or rating changes; in these models, Vega is negatively associated with environmental
ratings. Ordered-logit results are similar to the baseline, whereas firm fixed-effects estimates show
positive associations for composite and social ratings and a borderline positive association for
environmental ratings, but not governance.
Research Conclusion: Overall, the association between Vega and ESG ratings is specification-dependent.
The results therefore do not establish causality or a consistent positive relation with one-year rating
changes and apply only to firms disclosing outstanding stock options.