Employee stock options represent a significant potential source of dilution for many shareholders. It is well known that reported earnings tend to understate the associated costs, but an efficient stock market will show no such bias. If by contrast stock prices underestimate the future costs...

We study the effects of stock price informativeness (SPI) on the complexity of executive compensation. Using textual analysis of SEC proxy statements to construct measures of compensation complexity, we find informative stock prices reduce pay complexity. Using mutual fund redemption as an...

We study the motive of using equity-based pay in executive compensation: the risk-sharing motive versus the performance-measuring motive. The empirical design goes through the relationship between equity-based pay and stock price informativeness (SPI). We find equity-based pay decreases in SPI,...