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Do Firms Use Time‐Vested Stock‐Based Pay to Keep Research and Development Investments Secret?

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  • DAVID H. ERKENS

Abstract

I find that executives’ unvested equity holdings are larger when executives are employed by R&D‐intensive firms in industries that rely more on secrecy to profit from R&D. Moreover, I find that this relation is more pronounced for executives with a greater ability to exploit R&D‐related information and also holds for nonexecutive employees. In addition, I find that these firms use option grants with longer vesting periods and that unvested equity holdings reduce the likelihood that their executives leave to find employment elsewhere. Overall, my findings are consistent with firms using time‐vested stock‐based pay to reduce the leakage of R&D‐related information to competitors through employee mobility.

Suggested Citation

  • David H. Erkens, 2011. "Do Firms Use Time‐Vested Stock‐Based Pay to Keep Research and Development Investments Secret?," Journal of Accounting Research, Wiley Blackwell, vol. 49(4), pages 861-894, September.
  • Handle: RePEc:bla:joares:v:49:y:2011:i:4:p:861-894
    DOI: 10.1111/j.1475-679X.2011.00418.x
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    Cited by:

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    3. Christopher Kurzhals & Lorenz Graf‐Vlachy & Andreas König, 2020. "Strategic leadership and technological innovation: A comprehensive review and research agenda," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 437-464, November.
    4. James R Brown & Gustav Martinsson & Christian Thomann, 2022. "Can Environmental Policy Encourage Technical Change? Emissions Taxes and R&D Investment in Polluting Firms," Review of Financial Studies, Society for Financial Studies, vol. 35(10), pages 4518-4560.
    5. James E. McClure & David Chandler Thomas, 2018. "Can sticky consumption cause business cycles?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 31(1), pages 51-72, March.
    6. Glaeser, Stephen, 2018. "The effects of proprietary information on corporate disclosure and transparency: Evidence from trade secrets," Journal of Accounting and Economics, Elsevier, vol. 66(1), pages 163-193.
    7. He, Zhaozhao, 2018. "Money held for moving stars: Talent competition and corporate cash holdings," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 210-234.
    8. Huang, Minjie & Kubick, Thomas R. & Tseng, Kevin, 2021. "Technology spillovers and the duration of executive compensation," Journal of Banking & Finance, Elsevier, vol. 131(C).
    9. Castro, Paula & Keasey, Kevin & Amor-Tapia, Borja & Tascon, Maria T. & Vallascas, Francesco, 2020. "Does debt concentration depend on the risk-taking incentives in CEO compensation?," Journal of Corporate Finance, Elsevier, vol. 64(C).
    10. Mustafa Ciftci & Nan Zhou, 2016. "Capitalizing R&D expenses versus disclosing intangible information," Review of Quantitative Finance and Accounting, Springer, vol. 46(3), pages 661-689, April.

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