Abstract
This study finds a significant and pervasive decline but not an elimination of CEO optionbased compensation after the corporate governance scandals around 2000-2001 centered on executive option compensation. Some, but not all, of the drop is predicted by changes in the characteristics of firms, CEOs, boards of directors, and markets. In the cross-section, the change in CEO options is positively related to firm size, growth opportunities, ownership by large pension funds, and CEO experience and negatively related to firm age, board size, and fair value expensing of options. The findings provide significant support for the hypothesis that CEO options are affected by optimal contracting considerations, the hypothesis that CEO power is a significant determinant of CEO options, and, to some extent, the hypothesis that differences in perceived and actual costs of CEO options are important. Overall, however, the optimal contracting hypothesis is most able to explain the cross-sectional variation in the decline in options after the scandals.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
