Motivating Innovation in Newly Public Firms

33 Pages Posted: 14 Mar 2011 Last revised: 19 Jun 2014

Nina Baranchuk

University of Texas at Dallas - Naveen Jindal School of Management

Robert L. Kieschnick

University of Texas at Dallas

Rabih Moussawi

Villanova University - Department of Finance; University of Pennsylvania - The Wharton School

Date Written: August 1, 2013

Abstract

Prior research suggests that executive option grants that do not quickly vest provide managers with better incentives to pursue long-term, rather than short-term, objectives. Previous research also suggests that the pursuit of long-term objectives may 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, corporate governance, incentive contracts

JEL Classification: G34, L20

Suggested Citation

Baranchuk, Nina and Kieschnick, Robert L. and Moussawi, Rabih, Motivating Innovation in Newly Public Firms (August 1, 2013). Available at SSRN: https://ssrn.com/abstract=1784024 or http://dx.doi.org/10.2139/ssrn.1784024

Nina Baranchuk

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Robert L. Kieschnick (Contact Author)

University of Texas at Dallas ( email )

800 W. Campbell Rd, SM31
Richardson, TX 75080
United States
972-883-6273 (Phone)

HOME PAGE: http://www.utdallas.edu/~rkiesch/

Rabih Moussawi

Villanova University - Department of Finance ( email )

800 E Lancaster Ave
Bartley Hall, 2051
Villanova, PA 19085
United States

HOME PAGE: http://www.homepage.villanova.edu/rabih.moussawi

University of Pennsylvania - The Wharton School ( email )

United States

Register to save articles to
your library

Register

Paper statistics

Downloads
251
rank
112,954
Abstract Views
1,512
PlumX