This paper explores to find out the determinants of the change of CEO equity-based compensation structure. We use the US nonfinancial listed companies as sample and find that when the change of stock return and size increase positively, the percentage of stock compensation and the stock-minus-option compensation relative to last year increase. Moreover, when the change of CEO duality increases positively, the percentage of stock-compensation and the percentage of stock-minus-option compensation relative to last year decrease. The empirical results represent that when firms perform better, sizes are bigger, and when there is a supervision mechanism of CEOs, stock compensation relative to last year will rise. Furthermore, the change of entrenchment index is positively correlated with equity-based compensation relative to last year. We also investigate the relation between equity-based compensation and risk-taking. Option compensation will increase firms' stock return risk, but stock compensation will decrease firms' stock return risk. Although there is no obvious conclusion that whether stocks or options are better, this study shows that stock compensation dominates option compensation in the view of risk-taking. We recommend that executive equity-based compensation should mostly consist of restricted stock.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.