This study examines how the use of option-based compensation for directors affects their independence in their decisions on CEOs' option-grant dates. Firms typically grant CEOs at-the-money options, i.e., with the strike price set equal to the grant-day stock price. This practice creates a...

This paper examines the issues and controversies over the question of whether executive stock options should be expensed and, if so, how option values should be determined. It identifies and clarifies the key questions and surveys and synthesizes the academic and trade literature. Illustrations...

We investigate the incentives that led to the rash of restated financial statements at the end of the 1990s market bubble. We find that the likelihood of a misstated financial statement increases greatly when the CEO has very sizable holdings of in-the-money stock options. Misstatements are also...

The usage of performance-vesting (p-v) equity awards to top executives in large U.S. companies has grown from 20 to 70 percent from 1998 to 2012. We measure the effects of p-v provisions on value, delta, and vega of equity-based compensation. We find large differences in the value of p-v awards...

This paper examines whether the risk-taking incentives induced by performance-based vesting (p-v) compensation influence bank loan contracting and credit ratings. Consistent with our risk-shifting hypothesis, we find that the p-v based compensation, as measured by the proportion of grant date...

We provide a detailed analysis of 4,103 compensation clawback provisions used by S&P 1,500 firms from 2000–2013. The adoption and breadth of a clawback provision are related to the scope for executive malfeasance, compensation-related reasons to misrepresent performance; and firm governance....

Using a sample of more than 1,500 US public firms in the period 1998-2016, we examine how firms endogenously adjust CEO compensation contracts when they become financially distressed. The link between compensation and equity-based measures of firm performance is positive and strong prior to...

In this study, we examine whether CEOs' stock-based compensation has any relationship with the disclosure of highly proprietary information. While prior studies suggest that stock-based compensation provides managers with an incentive to enhance their voluntary disclosures in general, we argue...

Traditional finance theory suggests that riskier investments should yield higher returns. Challenging this notion, anecdotal and empirical evidence suggests that highly-incented managers may take on excessive risk, leading to greater losses, while other theoretical research argues that high...

This study investigates whether firm innovation can be systematically traced to the CEO's performance evaluation made by boards of directors. In evaluating CEO performance, the board can (i) assess and evaluate performance on job aspects that are per-se difficult to measure and (ii) signal firm...