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Stock Option Compensation and Managerial Turnover

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  • Raluca Georgiana NASTASESCU

    (Northern Illinois University, USA)

Abstract

This 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.

Suggested Citation

  • Raluca Georgiana NASTASESCU, 2009. "Stock Option Compensation and Managerial Turnover," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(2), pages 352-366, May.
    • Handle: RePEc:rom:rmcimn:v:10:y:2009:i:2:p:352-366
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    File URL: https://www.rmci.ase.ro/no10vol2/Vol10_No2_Article14.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    managerial retention; executive compensation; stock options; turnover; ownership.;
    All these keywords.

    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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