Stock-Based Compensation and Top Management Turnover

Mehran, Hamid; Yermack, David

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Stock-Based Compensation and Top Management Turnover

NYU Working Paper No. FIN-96-035

32 Pages Posted: 11 Nov 2008

See all articles by Hamid Mehran

David Yermack

New York University (NYU) - Stern School of Business

Date Written: May 1996

Abstract

We test the hypothesis that corporate managers leave their jobs less often when they receive stock-based compensation. In a sample of CEOs from 452 U.S. companies between 1984 and 1991, we find inverse associations between the probability of CEO turnover and the amount of stock option compensation in relation to cash pay. The association is even stronger when we exclude apparently involuntary CEO turnover. Our results suggest that stock-based compensation plays a significant role in helping firms retain the services of top managers.

Keywords: Compensation, Ownership, Incentives, Turnover

Suggested Citation: Suggested Citation

Mehran, Hamid and Yermack, David, Stock-Based Compensation and Top Management Turnover (May 1996). NYU Working Paper No. FIN-96-035, Available at SSRN: https://ssrn.com/abstract=1298300