Abstract
We examine the relation between executive equity compensation and corporate disclosure. Specifically, we propose that options and stock awards provide executives with distinct incentives to disclose forecasts to market participants. Since options are risker than stock awards, executives receiving more options will have greater incentives to guide investors and influence the stock price to maximize their compensation payout. We find that a greater proportion of options in executive equity compensation is associated with a greater likelihood to issue earnings forecasts as well as with greater frequency. Overall, these results suggest that options provide executives with stronger incentives than stock awards to mitigate the disclosure agency problem.
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