On the optimality of resetting executive stock options Viral
نویسنده
چکیده
The practice of resetting strike prices on underwater executive stock options has drawn criticism for weakening managerial incentives. Our model shows that although the anticipation of resetting can negatively a ect initial incentives, resetting can still be an important, value-enhancing aspect of compensation contracts, even from an ex-ante standpoint. In fact, we nd that some resetting is almost always optimal. The relative advantages of resetting diminish with greater ability of managers to in uence the resetting process, greater relative importance of external factors on stock performance, and lower costs of replacing incumbent managers. JEL classi cation: G32; J33; L14
منابع مشابه
On the optimality of resetting executive stock options
The practice of resetting strike prices on underwater executive stock options has drawn criticism for weakening managerial incentives. Our model shows that although the anticipation of resetting can negatively a!ect initial incentives, resetting can still be an important, value-enhancing aspect of compensation contracts, even from an ex-ante standpoint. In fact, we "nd that some resetting is al...
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