The effect of equity compensation on voluntary executive turnover

The effect of equity compensation on voluntary executive turnover Equity compensation provides incentives for executives to remain with the firm to avoid forfeiture of restricted shares and some or all of the value of stock options held. Empirically we show that the intrinsic value of unexercisable in-the-money options, the time value of unexercised options, and the value of restricted shares are inversely related to voluntary executive turnover. These findings which are most pronounced for strong performers, hold for CEOs and non-CEOs alike. While paying excess cash compensation also reduces turnover, the effect is less pronounced than that of equity compensation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

The effect of equity compensation on voluntary executive turnover

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Publisher
Elsevier
Copyright
Copyright © 2006 Elsevier B.V.
ISSN
0165-4101
D.O.I.
10.1016/j.jacceco.2006.09.004
Publisher site
See Article on Publisher Site

Abstract

Equity compensation provides incentives for executives to remain with the firm to avoid forfeiture of restricted shares and some or all of the value of stock options held. Empirically we show that the intrinsic value of unexercisable in-the-money options, the time value of unexercised options, and the value of restricted shares are inversely related to voluntary executive turnover. These findings which are most pronounced for strong performers, hold for CEOs and non-CEOs alike. While paying excess cash compensation also reduces turnover, the effect is less pronounced than that of equity compensation.

Journal

Journal of Accounting and EconomicsElsevier

Published: Mar 1, 2007

References

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