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Why do firms adopt CEO stock options? Evidence from the United States

[journal article]

Tzioumis, Konstantinos

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Abstract This paper examines the determinants of stock option introduction as a part of CEO compensation in listed US firms during the 1994–2004 period. The results are consistent with agency costs and recruiting considerations, suggesting that firms do not adjust CEO compensation in order to address the 'investment horizon' problem. The findings also suggest that CEO stock option adoption is not necessarily influenced by the same factors that have been found in the literature to affect the level of CEO stock option compensation and the adoption of broad-based stock option incentives. Overall, the findings provide evidence for several theoretical predictions, thus adding to our understanding of managerial incentives.
Classification Management Science; Human Resources Management
Free Keywords Stock options; CEO compensation; J33; M12; M52
Document language English
Publication Year 2008
Page/Pages p. 100-111
Journal Journal of Economic Behavior & Organization, 68 (2008) 1
DOI http://dx.doi.org/10.1016/j.jebo.2007.06.008
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)