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Stock-Based Compensation and Top Management Turnover

Authors: Mehran, Hamid
Yermack, David
Keywords: Compensation;Ownership;Incentives;Turnover
Issue Date: May-1996
Series/Report no.: FIN-96-035
Abstract: We test the hypothesis that corporate managers leave their jobs less often when they receive stock-based compensation. In a sample of CEOs from 452 U.S. companies between 1984 and 1991, we find inverse associations between the probability of CEO turnover and the amount of stock option compensation in relation to cash pay. The association is even stronger when we exclude apparently involuntary CEO turnover. Our results suggest that stock-based compensation plays a significant role in helping firms retain the services of top managers.
Appears in Collections:Finance Working Papers

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