The Long-Term Consequences of Short-Term Incentives

• 成果类型: Article
• 署名作者: Edmans, Alex; Fang, Vivian W.; Huang, Allen H.
• 署名单位: University of London; London Business School; Centre for Economic Policy Research - UK; European Corporate Governance Institute; University of Minnesota System; University of Minnesota Twin Cities; Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12410
• 发表日期: 2022
• 页码: 1007-1046
• 关键词: STOCK-OPTIONS; CASH-FLOW; performance; FIRMS; overconfidence; COMPENSATION; REPURCHASES; increases; duration; MARKETS

摘要

This paper studies the long-term consequences of actions induced by vesting equity, a measure of short-term incentives. Vesting equity is positively associated with the probability of a firm repurchasing shares, the amount of shares repurchased, and the probability of the firm announcing a merger and acquisition (M&A). However, it is also associated with more negative long-term returns over two to three years following repurchases and four years following M&A, as well as future M&A goodwill impairment. These results are inconsistent with CEOs buying underpriced stock or companies to maximize long-run shareholder value, but consistent with these actions being used to boost the short-term stock price and thus equity sale proceeds. CEOs sell their own stock shortly after using company money to buy the firm's stock, also inconsistent with repurchases being motivated by undervaluation.