Performance-Vesting Share Award Outcomes and CEO Incentives

• 成果类型: Article
• 署名作者: Pawliczek, Andrea
• 署名单位: University of Missouri System; University of Missouri Columbia
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2017-0382
• 发表日期: 2021
• 页码: 337-364
• 关键词: executive-compensation; corporate governance; moral hazard

摘要

I investigate the incentives provided by performance-vested stock awards (PVSAs) and the accuracy of ex ante PVSA valuations. In PVSAs, the number of shares awarded to the CEO varies based on how firm performance compares to target performance levels. The incentives provided by PVSAs and their valuations depend on the difficulty of the performance targets, which cannot be easily determined using ex ante disclosures. Using a hand-collected dataset of PVSA outcomes, I find that target difficulty is such that CEOs have incentives to earn additional shares from improved firm performance in 75 percent of PVSAs. In contrast, findings in prior studies using methodologies that rely on comparisons of PVSA targets to similarly named financial statement metrics suggest only 12 percent of awards provide such incentives. I further find that, on average, PVSAs pay out 115 percent of shares disclosed in ex ante valuations, suggesting the valuations of awards are understated.