Stock vesting conditions, control benefits and managerial replacement

Meg Adachi-Sato

Canadian Journal of Economics, 2018, vol. 51, issue 1, 275-313

Abstract: This article considers the effect of vesting conditions of stock-based compensation on firms decisions to replace managers. I indicate that firms may excessively replace managers with both long- and short-term vested stock-based compensation, while excessive retention can be caused only by short-term vested options. If the discount factor is sufficiently small, I also show that short-term vested stock-based compensation is the equilibrium contract. The study also has implications for regulations concerning mandatory deferral and clawback of executive pay.

JEL-codes: D86 (search for similar items in EconPapers)
Date: 2018
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