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
Recommended Citation
Core, J. E., & Guay, W. R. (1999). The Use of Equity Grants to Manage Optimal Equity Incentive Levels. Journal of Accounting and Economics, 28 (2), 151-184. http://dx.doi.org/10.1016/S0165-4101(99)00019-1
Date Posted: 27 November 2017
This document has been peer reviewed.