Trading away incentives / Stefano Colonnello, Giuliano Curatola, Shuo Xia
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Trading away incentives
Discovery
1819880478
URN
urn:nbn:de:gbv:3:2-921465
DOI
ISBN
ISSN
Koordinaten
Skalierung
dc.contributor.contributor
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Publication history
Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, [25. Oktober 2022]
Content
1 Online-Ressource (III, 44 Seiten, 1,25 MB) : Diagramme
Edition
This draft: October 19, 2022
Language
eng
Comment
Abstract
Equity pay has been the primary component of managerial compensation packages at US public firms since the early 1990s. Using a comprehensive sample of top executives from 1992-2020, we estimate to what extent they trade firm equity held in their portfolios to neutralize increments in ownership due to annual equity pay. Executives accommodate ownership increases linked to options awards. Conversely, increases in stock holdings linked to option exercises and restricted stock grants are largely neutralized through comparable sales of unrestricted shares. Variation in stock trading responses across executives hardly appears to respond to diversification motives. From a theoretical standpoint, these results challenge (i) the common, generally implicit assumption that managers cannot undo their incentive packages, (ii) the standard modeling practice of treating different equity pay items homogeneously, and (iii) the often taken for granted crucial role of diversification motives in managers' portfolio choices.
Series
IWH-Diskussionspapiere ; 2022, no. 23 ppn:837399270