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The Propensity to Split and CEO Compensation

Erik Devos, William B. Elliott and Richard S. Warr

Financial Management, 2018, vol. 47, issue 1, 105-129

Abstract: 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 well†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).

Date: 2018
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