Published December 2007
| public
Journal Article
How employee stock options and executive equity ownership affect long-term IPO operating performance
Abstract
To ascertain whether the form of managerial compensation affects a firm's long-term operating performance, we track IPOs for 5 years after the expiration of the stabilization period. New public companies perform better when managers receive a balanced combination of stock option grants and equity ownership. Firms with unbalanced compensation arrangements, large option grants and little equity ownership or vice versa do not perform as well. This empirical finding is consistent with a theoretical explanation based on managerial risk aversion and the alignment of managerial and owner incentives.
Additional Information
© 2007 Elsevier B.V. Received 15 September 2005, Revised 16 February 2007, Accepted 25 February 2007, Available online 6 April 2007. We are grateful to Mark Taranto who contributed a major portion of the data, to an anonymous referee and to the editor, David J. Denis, both of whom provided many helpful comments and suggestions.Additional details
- Eprint ID
- 95205
- DOI
- 10.1016/j.jcorpfin.2007.02.003
- Resolver ID
- CaltechAUTHORS:20190503-125448764
- Created
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2019-05-03Created from EPrint's datestamp field
- Updated
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2021-11-16Created from EPrint's last_modified field