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Value-Based CEO Equity Grants

Author

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  • Xu, Jin
  • Ye, Pengfei
  • Zhang, Cheng

Abstract

We document firms often determine CEO equity grants based on a predetermined dollar value (value-based equity grant) instead of on the number of shares (share-based grant). Value-based equity grants weaken the relationship between stock performance and CEO equity pay, lower CEO portfolio delta, and slow firms’ investment in R&D. We find that retention pressure is a key reason for the use of value-based equity pay, while governance could also matter. Overall, this paper alerts boards to the unintended consequences of pursuing a target pay level or pay structure because such practices can lead to value-based equity grants in CEO compensation.

Suggested Citation

  • Xu, Jin & Ye, Pengfei & Zhang, Cheng, 2025. "Value-Based CEO Equity Grants," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 60(7), pages 3514-3550, November.
    • Handle: RePEc:cup:jfinqa:v:60:y:2025:i:7:p:3514-3550_13
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