This paper examines the effect on valuation and incentives of allowing executives receiving options to trade on the market portfolio. We propose a continuous time utility maximization model to value stock and option compensation from the executive’s perspective. The executive may invest non-option wealth in the market and riskless asset but not in the company stock itself, leaving them subject ...

Protecting intellectual property is a major challenge for many firms. This paper examines how compensation arrangements are influenced by the mechanisms firms use to protect their intellectual property. Consistent with firms being concerned about employees leaving to exploit R&D related information on their own or with competing firms, I find that executives’ unvested equity holdings and total ...

The design of incentive compatible executive-compensation policies is a crucial element for firms that seek a competitive advantage in an effort to maximize owner wealth. In this paper, we examine the relationship between executive compensation and measures of firm performance that capture the economic profit earned by the firm, namely, EVA and MVA. We test the hypothesis that after controlling...

Abstract The aim of executive compensation plans is to incentivize executives maximize long-term firm value. Past research shows that executives’ pay determined by short-term stock performance a substantial degree. This paper tests for distributional differences in the time horizon performance–pay relation, controlling executive-firm fixed effects quantile regression framework. I identify and i...

This study introduces a new dimension, age diversity of non-CEO executives, which moderates the relationship between promotion-based tournament incentives, measured as pay gap CEO and firm performance. For sample Chinese listed firms from 2005 to 2015, we find that incentives for executives relate positively is weaker when are different cohorts, whereas effect enhanced same cohort. The negative...

In the international literature, there exists a lively discussion about fundamentals of different executive compensation models. Executive is relevant not only from point view corporate management but also governance and here potential information asymmetries misconduct. Internal or external metrics, in particular, are used as basis for compensation. family businesses, which per se less likely ...