Stock-Based Pay in New Economy Firms

Ittner, Lambert, and Larcker (J. Accounting Economics (2003)) present compelling evidence that new economy firms rely more on stock-based compensation than do old economy firms, based on 1998 and 1999 data from a proprietary sample of companies. I complement the ILL results by analyzing data over a longer time period (1992-2001) and, more importantly, document the effect of the 2000 market crash on stock-based pay in new economy firms. Finally, I offer evidence supporting the conjecture that differences in pay practices between new and old economy firms reflect accounting considerations, perceived costs, and competitive inertia