Accounting Papers

Document Type

Journal Article

Date of this Version

12-1999

Publication Source

Journal of Accounting and Economics

Volume

28

Issue

2

Start Page

151

Last Page

184

DOI

10.1016/S0165-4101(99)00019-1

Abstract

We predict and find that firms use annual grants of options and restricted stock to CEOs to manage the optimal level of equity incentives. We model optimal equity incentive levels for CEOs, and use the residuals from this model to measure deviations between CEOs’ holdings of equity incentives and optimal levels. We find that grants of new incentives from options and restricted stock are negatively related to these deviations. Overall, our evidence suggests that firms set optimal equity incentive levels and grant new equity incentives in a manner that is consistent with economic theory.

Copyright/Permission Statement

© 1999. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

contracting, managerial compensation, managerial ownership, equity incentives, stock options

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Date Posted: 27 November 2017

This document has been peer reviewed.