Equity Vesting and Investment

Edmans, Alex; Fang, Vivian W.; Lewellen, Katharina

doi:10.1093/rfs/hhx018

Cited by 274 publications

(102 citation statements)

References 52 publications

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“…R&D, capital, and advertising intensities are measured as a ratio of total assets. Following previous studies (Barnes, 2001;Chakraborty, Rzakhanov, & Sheikh, 2014;Edmans, Fang, & Lewellen, 2017;Hall, 1999;Servaes & Tamayo, 2013), I replace missing values on R&D and advertising expenditures with 0. However, I include two additional categorical variables to control for the systematic effect of missing observations.…”

Section: Other Control Variablesmentioning

confidence: 99%

CEO power and corporate risk: The impact of market competition and corporate governance

Sheikh

2019

Corporate Governance

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Research Question/Issue Although there is no unified theory that can explain the relationship between CEO power and corporate risk, the empirical evidence generally finds a positive association. This study argues that market competition and corporate governance play critical roles in influencing this relationship. Research Findings/Insights Using a large panel of nonfinancial U.S. corporations for the period 1992–2015, I find that CEO power is positively associated with total and idiosyncratic measures of risk. However, this positive association remains significant only when market competition is high or corporate governance is strong. Theoretical/Academic Implications The research design of this study combines the predictions of agency theory, the behavioral agency model, and prospect theory to further our understanding of the relationship between CEO power and corporate risk, including consideration of how competition and corporate governance influence this relationship. Practitioner/Policy Implications The empirical evidence presented in this study can help boards to more accurately gauge when CEO power is most beneficial in terms of optimal levels of corporate risk and to better understand the relationship between power and risk. The results suggest that boards should grant more power to their CEOs when their firms operate in high‐competition markets or have strong corporate governance in place.

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Section: Other Control Variablesmentioning

confidence: 99%

CEO power and corporate risk: The impact of market competition and corporate governance

Sheikh

2019

Corporate Governance

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“… See Cadman and Sunder (2014),Gopalan et al (2014),Cziraki and Groen-Xu (2017),Edmans, Fang, and Lewellen (2017), and Gonzalez-Uribe and Groen-Xu (2017).3 See Huddart,Ke, and Shi (2007) andJeng, Metrick, and Zeckhauser (2003). In addition, corporate insiders must report changes in ownership to the SEC within two business days (https://www.sec.gov/fast-answers/answersform345htm.html) and firms routinely impose their own restrictions on insider trading activity (see, e.g.,Bettis, Coles, and Lemmon (2000) andJagolinzer, Larcker, and Taylor (2011)).…”

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confidence: 99%

Insider Investment Horizon

Akbas¹,

Jiang²,

Koch

2020

The Journal of Finance

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We examine the relation between insiders' investment horizon and the information content of their trades with respect to future stock returns. We conjecture that an insider's investment horizon establishes a benchmark for expected patterns of continued trading behavior and thus helps identify unexpected insider trades, which should be more informative in efficient markets. Consistent with this conjecture, the trades of short-horizon insiders are both more unexpected and more informed, on average, than those of long-horizon insiders. Short-horizon insiders and their firms also tend to display characteristics that are associated with a greater focus on short-termism.

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“…Shue and Townsend (2013) exploit the fact that options are granted according to multi-year cycles as an instrument for option grants. Edmans, Fang, and Lewellen (2016) and Edmans, Goncalves-Pinto, Groen-Xu, and Wang (2016) analyze the scheduled vesting of equity resulting from grants made several years prior.…”

Section: Empirical Questionsmentioning

confidence: 99%

Executive Compensation: A Modern Primer

Edmans

Gabaix

2016

Journal of Economic Literature

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187

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This article studies traditional and modern theories of executive compensation, bringing them together under a simple unifying framework accessible to the general-interest reader. We analyze assignment models of the level of pay, and static and dynamic moral hazard models of incentives, and compare their predictions to empirical …ndings. We make two broad points. First, traditional theories …nd it di¢ cult to explain the data, suggesting that compensation results from "rent extraction" by CEOs. However, more modern "shareholder value"theories that arguably better capture the CEO setting do deliver predictions consistent with observed practices, suggesting that these practices need not be ine¢ cient. Second, seemingly innocuous features of the modeling setup, often made for tractability or convenience, can lead to signi…cant di¤erences in the model's implications and conclusions on the e¢ ciency of observed practices. We close by highlighting apparent ine¢ ciencies in executive compensation and additional directions for future research.

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Equity Vesting and Investment

Cited by 274 publications

References 52 publications

CEO power and corporate risk: The impact of market competition and corporate governance

CEO power and corporate risk: The impact of market competition and corporate governance

Insider Investment Horizon

Executive Compensation: A Modern Primer

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