Empirical Evidence on How CEO Option Incentives Spur Corporate Innovation from Panel Analysis with Lagged Incentives

Yuchen Luo ()
Additional contact information
Yuchen Luo: Shanghai Normal University, School of Finance and Business

A chapter in Proceedings of the 2026 11th International Conference on Financial Innovation and Economic Development (ICFIED 2026), 2026, pp 436-449 from Springer

Abstract: Abstract This study examines the real effects of Chief Executive Officer (CEO) option incentives on corporate innovation output, assessing whether this contractual instrument can effectively bridge the inherent tension between managerial risk aversion and the uncertainty inherent in innovation activities. Based on data from U.S.-listed companies from 1993 to 2021, the research systematically investigates the immediate impact of option incentives on patent applications and their sustained, cross-period effect on patent grants. The empirical findings reveal that option incentives significantly promote corporate innovation, and this effect persists for up to two years after the grant. Further analysis shows that this effect is not universal but is strictly limited to industries with greater suitability for option contracts, such as technology-intensive sectors, and is more pronounced in sub-samples of larger firms and those with higher leverage. These findings confirm that the relationship between option incentives and innovation output is more likely to be a context-dependent causal relationship than a mere correlation. This study deepens the understanding of how executive compensation design influences corporate innovation strategy.

Keywords: CEO Option Incentives; Corporate Innovation; Panel Regression; Lagged Effects; Heterogeneity Analysis (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:spr:advbcp:978-94-6239-642-5_43

Ordering information: This item can be ordered from
http://www.springer.com/9789462396425

DOI: 10.2991/978-94-6239-642-5_43

Access Statistics for this chapter

More chapters in Advances in Economics, Business and Management Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().