Motivating innovation in newly public firms

Nina Baranchuk, Robert Kieschnick and Rabih Moussawi

Journal of Financial Economics, 2014, vol. 111, issue 3, 578-588

Abstract: Prior research suggests that executive option grants that do not quickly vest provide managers with better incentives to pursue long-term, instead of short-term, objectives. Previous research also suggests that the pursuit of long-term objectives could be undermined by the risk of early termination. We conjecture that these arguments jointly suggest that managers are better motivated to pursue innovation when they are given more incentive compensation with longer vesting periods for unexercised options and yet some protection from disruptive takeover threats. Our evidence for a sample of newly public firms is consistent with more innovative firms jointly choosing such a combination.

Keywords: Innovation; Vesting period; Incentive compensation (search for similar items in EconPapers)
JEL-codes: D86 G20 L20 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:111:y:2014:i:3:p:578-588

DOI: 10.1016/j.jfineco.2013.11.010

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