Stock option vesting conditions, CEO turnover, and myopic investment

• 成果类型: Article
• 署名作者: Laux, Volker
• 署名单位: University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.06.003
• 发表日期: 2012
• 页码: 513-526
• 关键词: Executive pay; Stock option vesting; Managerial myopia; ceo turnover

摘要

Corporations have been criticized for providing executives with excessive incentives to focus on short-term performance. This paper shows that investment in short-term projects has beneficial effects in that it provides early feedback about Chief Executive Officer (CEO) talent, which leads to more efficient replacement decisions. Due to the threat of CEO turnover, the optimal design of stock option vesting conditions in executive compensation is more subtle than conventional views suggest. For example, I show that long vesting periods can backfire and induce excessive short-term investments. The study generates new empirical predictions regarding the determinants and impacts of stock option vesting terms in optimal contracting. (C) 2012 Elsevier B.V. All rights reserved.