The Structure and Performance Consequences of Equity Grants to Employees of New Economy Firms

55 Pages Posted: 8 Jan 2002

See all articles by Christopher D. Ittner

Christopher D. Ittner

University of Pennsylvania - Accounting Department

Richard A. Lambert

University of Pennsylvania - Accounting Department

David F. Larcker

Stanford University - Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 2002

Abstract

The paper examines the determinants and performance consequences of equity grants to senior-level executives, lower-level managers, and non-exempt employees of "new economy" firms. We find that many of the equity grant determinants and their relative importance vary significantly between new and old economy firms. In addition, we find that employee retention objectives, which new economy firms rank as the most important goal of their equity grant programs, have a significant impact on new hire grants, but not on annual, ongoing grants. Our exploratory performance tests indicate that lower than expected option grants and/or existing option holdings are associated with lower accounting and stock price performance in subsequent years. However, we find that greater than expected option and equity grants and holdings have little consistent association with future performance.

JEL Classification: J33, M41, M40, M46, G12

Suggested Citation

Ittner, Christopher D. and Lambert, Richard and Larcker, David F., The Structure and Performance Consequences of Equity Grants to Employees of New Economy Firms (January 2002). JAE Boston Conference June 2001. Available at SSRN: https://ssrn.com/abstract=296275 or http://dx.doi.org/10.2139/ssrn.296275

Christopher D. Ittner (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-7786 (Phone)
215-573-2054 (Fax)

Richard Lambert

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-7782 (Phone)
215-573-5463 (Fax)

David F. Larcker

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

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