Abstract
AbstractThis study investigates the performance consequences of changes in the optimality of chief executive officer (CEO) ownership by using the 2003 dividend tax cut (DTC) as an exogenous shock. I find that CEO ownership of dividend payers significantly increased after the DTC in the form of higher annual restricted stock grants and more option exercises. I also document that more optimal ownership is associated with performance improvement and more efficient R&D investment. Overall, findings from my study provide insights into the role of managerial equity incentives for firm performance.
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