Stock Option Compensation and Managerial Turnover
AbstractThis study examines the association between managerial turnover and equity-based compensation. I investigate whether stock options act to bond executives to their firms and whether retention of managers is a motivation of companies in designing CEO incentive contracts. The results show that stock options do negatively influence the probability of a CEO leaving the company. The monetary cost of losing the value of equity-based compensation package keeps the manager with his company. I also find that in deciding upon a CEO's compensation scheme, firms take into account the probability of a CEO resigning from the company in the next period and award more stock options to reduce the threat of turnover. In general, the results show that stock options have an important role in managers' retention by testing economic explanations for observed behavior.
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Bibliographic InfoArticle provided by Faculty of Management, Academy of Economic Studies, Bucharest, Romania in its journal REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT.
Volume (Year): 10 (2009)
Issue (Month): 2 (May)
managerial retention; executive compensation; stock options; turnover; ownership.;
Find related papers by JEL classification:
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
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