Stock-based Compensation Plans and Employee Incentives

Jan Zabojnik

No 274650, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: Standard principal-agent theory predicts that large firms should not use employee stock options and other stock-based compensation to provide incentives to non-executive employees. Yet, business practitioners appear to believe that stock-based compensation improves incentives, and mounting empirical evidence points to the same conclusion. This paper provides an explanation for why stock-based incentives can be effective. In the model of this paper, employee stock options complement individual measures of performance in inducing employees to invest in firm-specific knowledge. In some situations, a contract that only consists of options is more effcient than a contract based solely on individual performance.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 42
Date: 2014-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/274650/files/qed_wp_1325.pdf (application/pdf)

Related works:
Working Paper: Stock-based Compensation Plans And Employee Incentives (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:274650

DOI: 10.22004/ag.econ.274650

Access Statistics for this paper

More papers in Queen's Economics Department Working Papers from Queen's University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().