Contractual features of CEO performance-vested equity compensation

Gao, Zhan; Hwang, Yuhchang; Wu, Wan-Ting

doi:10.1016/j.jcae.2017.09.005

Cited by 6 publications

(4 citation statements)

References 45 publications

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“…Matolcsy and Wright (2011) find that firms whose CEOs receive compensation inconsistent with their firm characteristics have lower performance than firms whose CEOs' compensation is consistent with their firms' performance. Gao et al (2017) find that firms using market metrics are more likely to adopt relative performance evaluation and long performance periods than firms that use accounting metrics.…”

Section: Introductionmentioning

confidence: 84%

Empirical examination of the direct and moderating role of corporate social responsibility in top executive compensation

Malik

Shim

2022

PAR

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Purpose The purpose of this study is to examine the direct association between firms’ corporate social responsibility (CSR) scores, CSR disclosures and executive compensation. This study further investigates the moderating role of CSR in the association between executive compensation and firms’ stock market and accounting performances. Design/methodology/approach This study collects CEO compensation information from the Execucomp database and CSR performance information from the MSCI ESG database. The final sample consists of 4,193 firm-year observations for 1,318 US public firms for the period 2009–2013. This study uses lagged regression analysis to test the direct and moderating roles of CSR in executive compensation. Findings Regarding the direct role of CSR, this study finds that CEO compensation is positively related to CSR performance but not to firms’ issuance of CSR reports. This study also finds a positive moderating role of CSR in the relationship between CEO compensation and firms’ stock performance. However, the authors do not identify any role for CSR in the relationship between CEO compensation and accounting performance. The results also show a negative association of CSR in the relationship between CEO compensation and firm size. Originality/value This study fills a gap in the literature by providing empirical evidence on the direct association between CSR and CEO compensation and how the association between CEO compensation and firm performance is moderated by CSR scores. The novel findings of this study will benefit managers, boards of directors, shareholders and other stakeholders, including regulators and policymakers.

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Section: Introductionmentioning

confidence: 84%

Empirical examination of the direct and moderating role of corporate social responsibility in top executive compensation

Malik

Shim

2022

PAR

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“…Since China launched equity incentive system in 2006, now equity incentive plan has become a normal arrangement for Chinese listed companies. Research in this field points out that the key to achieve the expected effect of equity incentives depends on the setting of core contract elements (Gao et al , 2017), among which the equity incentive model is widely discussed. From the practice of enterprises in China, restricted stock has gradually replaced stock option and becomes the mainstream equity incentive model.…”

Section: Introductionmentioning

confidence: 99%

The mystery of choice of equity incentive model: based on the game theory analysis between shareholders and top executives

Chen

Shi

Liang

et al. 2023

NBRI

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Purpose Based on the background of the restricted stock has gradually replaced stock option and has become the mainstream equity incentive model in China, this paper aims to investigate the which factors affect the choice of equity incentive model, and the impacts of equity incentive model. Design/methodology/approach The theoretical analysis is based on the game theory between shareholders and top executives. The empirical analysis is based on the detailed data of equity incentives in China’s listed companies from 2006 to 2017; the logit method and least square method are implemented to estimate the regression coefficients and Black–Scholes options pricing model to estimate the value of restricted stock/option granted to the CEO. Findings This paper documents that enterprises with serious agency problems, high investment risks, high stock price synchronicity and great executive power are significantly and positively related to restricted stock. The main empirical findings still hold after several robust tests. In addition, restricted stock can significantly improve corporate performance when the performance evaluation index is strict and the validity period is long, while for the sample group with loose performance index and short validity period, restricted stock significantly reduces corporate performance. Originality/value This paper analyzes the “black box” of equity incentive model selection from the stakeholders’ game perspective by constructing a game theory model to investigate the reasons for the choice of equity incentive model in various situations, which enriches the research in this field. Moreover, this paper finds that restricted stock has both incentive and welfare characteristics, and the rationality of performance appraisal goals is the key factor leading to the difference in incentive effects. Overall, the research indicates that only well-designed equity incentive plans can improve corporate performance, which contributes to regulators and practitioners to form a rational understanding of restricted stock model and provides a reference for their decision-making.

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“…Incremental improvements in the market economy tend to supplement the essential contractual components of enterprises' equity incentives, and researchers' research on equity incentives has been extended. Some researchers believed that setting the core contractual elements was an integral part of whether the equity incentive scheme can efectively resolve the moral hazard and adverse selection problems arising from the principal agent, and in the setting of contract elements, the choice of incentive model and incentive object is critical [2]. Presently, domestic enterprises mainly focus on two models of equity incentive, namely, stock option incentive and restricted stock incentive, and the source of subject matter incentive is mostly through repurchasing stock and issuing shares.…”

Section: Introductionmentioning

confidence: 99%

Equity Incentive Model, Source of Subject Matter and Enterprise Performance: Modification Effect Based on Equity Incentive Intensity

Wang

2022

Mathematical Problems in Engineering

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For modern enterprises, equity incentive is an important means to solve the principal-agent problem, the choice of incentive mode and the source of the incentive is an inevitable issue in the implementation of an equity incentive scheme. Based on the sample data of A-share listed companies from 2010 to 2020, this paper constructs a panel two-way fixed effect model, combining regression analysis and three interactions with differential equations (PDE), which empirically explores the relationship between two incentive models of stock option and restricted stock, the source of subject matter and enterprise performance. The study shows that the restricted stock incentive model significantly improved the performance of enterprises, and the intensity of incentives played a significant inverted U-shaped moderating role between the enterprise’s performance and the different incentive models. After adding the subject matter incentive source, it is further found that repurchase, as the source of subject matter, has a positive moderating effect on restricted stock and a negative moderating effect on stock option. The intensity of equity incentives moderates the relationship between stock option incentive models and enterprise performance when enterprises use repurchases as the source. The results of the above-given research provide some reference for enterprises to give appropriate incentive intensities, objective selection of the subject matter source under different equity incentive models based on their characteristics, and facilitation of more efficient use of equity incentive tools.

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Contractual features of CEO performance-vested equity compensation

Cited by 6 publications

References 45 publications

Empirical examination of the direct and moderating role of corporate social responsibility in top executive compensation

Empirical examination of the direct and moderating role of corporate social responsibility in top executive compensation

The mystery of choice of equity incentive model: based on the game theory analysis between shareholders and top executives

Equity Incentive Model, Source of Subject Matter and Enterprise Performance: Modification Effect Based on Equity Incentive Intensity

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