Abstract

http://ssrn.com/abstract=2105647
 
 

References (29)



 


 



Do Executives Hold on to Equity-Linked Incentives? The Role of Minimum Shareholding Policies


Piotr Korczak


University of Bristol - Department of Finance and Accounting

Xicheng Liu


University of Bristol - School of Economics, Finance and Management

July 31, 2013


Abstract:     
Previous literature documents that executives tend to cash out equity incentives when equity-linked compensation vests. Such a behavior destroys long-term incentives and hence is costly to outside shareholders. It is recommended that the unloading of incentives can be limited when the firm adopts a minimum executive shareholding policy. In this paper we provide the first evidence on the effectiveness of such policies. We find that the policies have a very limited effect on managerial behavior. They do not encourage larger retention of shares acquired from exercised options and from vested performance shares but somewhat increase share accumulation through other channels, for example open market purchases. We identify factors in the design and enforcement of the policies that improve their effectiveness. We also show that the lack of compliance with the policy has potentially important economic implications in the form of weaker firm performance and lower valuations. Our results have implications for the debate on executive remuneration regulations and practices.

Number of Pages in PDF File: 36

Keywords: Equity-linked pay, rebalancing, minimum shareholding policies

JEL Classification: G32, M52

working papers series





Download This Paper

Date posted: July 15, 2012 ; Last revised: September 6, 2013

Suggested Citation

Korczak, Piotr and Liu, Xicheng, Do Executives Hold on to Equity-Linked Incentives? The Role of Minimum Shareholding Policies (July 31, 2013). Available at SSRN: http://ssrn.com/abstract=2105647 or http://dx.doi.org/10.2139/ssrn.2105647

Contact Information

Piotr Korczak (Contact Author)
University of Bristol - Department of Finance and Accounting ( email )
8 Woodland Road
Bristol BS8 1TN
United Kingdom
+44 117 9288407 (Phone)
+44 117 9288577 (Fax)
HOME PAGE: http://www.efm.bris.ac.uk/ecxpk/
Xicheng Liu
University of Bristol - School of Economics, Finance and Management ( email )
United Kingdom
Feedback to SSRN


Paper statistics
Abstract Views: 448
Downloads: 60
Download Rank: 218,781
References:  29

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.375 seconds