Managerial Short-Termism and Investment: Evidence from Accelerated Option Vesting

63 Pages Posted: 29 Jun 2013 Last revised: 25 Jun 2019

See all articles by Tomislav Ladika

Tomislav Ladika

University of Amsterdam

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Date Written: June 24, 2019


We show that executives cut investment when their incentives become more short-term. We examine a unique event in which hundreds of firms eliminated option vesting periods to avoid a drop in income under accounting rule FAS 123-R. This event allowed executives to exercise options earlier and thus profit from boosting short-term performance. Our identification exploits that FAS 123-R’s adoption was staggered almost randomly by firms’ fiscal year-ends. CEOs cut investment and reported higher short-term earnings after option acceleration, and they subsequently increased equity sales.

Keywords: Managerial myopia, corporate investment, vesting duration, FAS 123-R

JEL Classification: G31, G32, G34

Suggested Citation

Ladika, Tomislav and Sautner, Zacharias, Managerial Short-Termism and Investment: Evidence from Accelerated Option Vesting (June 24, 2019). Available at SSRN: or

Tomislav Ladika

University of Amsterdam ( email )

Roetersstraat 18
Amsterdam, 1018WB
020-5255501 (Phone)


Zacharias Sautner (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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