The Structure and Performance Consequences of Equity Grants to Employees of New Economy Firms
Posted: 5 Feb 2003
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 the determinants of equity grants are significantly different in new versus old economy firms. We also 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 subsequent grants. Our exploratory performance tests indicate that lower than expected grants and/or existing holdings of options are associated with poorer performance in subsequent years.
Keywords: management compensation, stock option, incentive
JEL Classification: J33, M41, M40, M46, G12
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