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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27006
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| Title: | Does Equity-Based Compensation Increase Managers' Ownership? |
| Authors: | Ofek, Eli
Yermack, David |
| Issue Date: | Nov-1997 |
| Series/Report no.: | FIN-98-052 |
| Abstract: | We find that executives sell shares of previously owned stock after
receiving equity-based incentive compensation, counteracting boards'
attempts to tie their wealth to firm value. Executives sell stock during
years in which they receive new stock options or restricted stock, and
some evidence indicates further selling over time if options move
into-the-money. When options are exercised, managers sell a large
majority of shares acquired. Effects are strongest for executives who
already hold many shares, while stock-based compensation does appear to
increase the holdings of managers with low ownership. Although valuation
theorists who study executive compensation frequently assume that
executives cannot hedge the risks of stock-based pay, our research
provides evidence to the contrary. |
| URI: | http://hdl.handle.net/2451/27006 |
| Appears in Collections: | Finance Working Papers
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