The Propensity to Split and CEO Compensation
William B. Elliott and
Richard S. Warr
Financial Management, 2018, vol. 47, issue 1, 105-129
We analyze the relation between the delta and vega of a chief executive officer's (CEO) compensation and the propensity of the firm to engage in a split. Controlling for other wellâ€ known factors, we find that CEOs with compensation that has higher levels of delta are more likely to split their shares. Furthermore, the choice of split factor is inversely related to delta. Our results are economically significant: for the average (median) firm in our sample, a stock split results in a CEO wealth gain of $4.9 million ($84,000).
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