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

Posted: 5 Feb 2003

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

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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 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

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. Journal of Accounting and Economics, Vol. 34, Nos. 1-3, pp. 89-127, January 2003. Available at SSRN: https://ssrn.com/abstract=377520

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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