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Ceo Equity Portfolio Incentives And Layoff Decisions

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  • Jeffrey T. Brookman
  • Saeyoung Chang
  • Craig G. Rennie

Abstract

CEOs with higher equity-based compensation are widely believed to be more likely to act in shareholders' interests. Unlike less common acquisitions, voluntary liquidations, or seasoned equity offerings, layoffs are comparatively common elements of firms' operating strategies. We find that CEOs with at least one year of tenure who possess greater incentives from portfolios of restricted stock and stock option grants are more likely to announce layoffs, and that these layoffs create shareholder value. We conclude that accumulated portfolios of restricted stock and stock option grants encourage CEOs to adopt operating strategies that improve operating profits and stock performance. 2007 The Southern Finance Association and the Southwestern Finance Association.

Suggested Citation

  • Jeffrey T. Brookman & Saeyoung Chang & Craig G. Rennie, 2007. "Ceo Equity Portfolio Incentives And Layoff Decisions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 30(2), pages 259-281.
  • Handle: RePEc:bla:jfnres:v:30:y:2007:i:2:p:259-281
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    Cited by:

    1. Carola Frydman & Dirk Jenter, 2010. "CEO Compensation," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 75-102, December.
    2. C. Lakshman & Aarti Ramaswami & Ruth Alas & Jean Kabongo & J. Rajendran Pandian, 2014. "Ethics Trumps Culture? A Cross-National Study of Business Leader Responsibility for Downsizing and CSR Perceptions," Journal of Business Ethics, Springer, vol. 125(1), pages 101-119, November.
    3. Lakshman Chandrashekhar & Linh Chi Vo & Rani S. Ladha, 2015. "Equity Portfolio Incentives to CEOs for Downsizing: Differential impacts on survivors vs. victims in three countries," Working papers 169, Indian Institute of Management Kozhikode.

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