Please use this identifier to cite or link to this item:
https://hdl.handle.net/2440/54138
Citations | ||
Scopus | Web of Science® | Altmetric |
---|---|---|
?
|
?
|
Type: | Journal article |
Title: | Is there a firm-size effect in CEO stock option grants? |
Author: | Rosser, B. Canil, J. |
Citation: | Corporate Ownership and Control, 2008; 6(1):115-126 |
Publisher: | Virtus Interpress |
Issue Date: | 2008 |
ISSN: | 1727-9232 1810-3057 |
Abstract: | Schaefer (1998) and Baker and Hall (2004) posit a firm size effect for regular executive compensation but not specifically for executive stock option grants. They propose an inverse relation between pay-performance sensitivity and firm size along with a positive relation between the marginal productivity of executive effort and firm size. The product of pay-performance sensitivity and executive productivity is 'incentive strength'. They find a weakly positive association between incentive strength and firm size. We substitute Hall and Murphy's (2002) pay-performance sensitivity metric to detect a firm size effect in CEO stock option grants. After adjusting for small-firm risk aversion and private diversification 'clienteles', we document evidence of a residual small-firm effect impacting on incentive strength principally through grant size. Given lower small-firm deltas, grant size appears to have been increased by compensation committees to ensure small-firm CEOs are not under-compensated relative to their large-firm counterparts. We also find that firm complexity influences pay-performance sensitivity as well, but not labor productivity (proxying for CEO productivity). No evidence is found that firm smallness and complexity impact on labor productivity. However, we empirically confirm a negative relation between pay-performance sensitivity and firm smallness and, by implication, firm complexity. |
Keywords: | executive stock options pay-performance sensitivity firm size |
Description: | © 2008 Social Science Electronic Publishing, Inc |
DOI: | 10.22495/cocv6i1p12 |
Description (link): | http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1097396 |
Published version: | http://dx.doi.org/10.22495/cocv6i1p12 |
Appears in Collections: | Aurora harvest Business School publications |
Files in This Item:
There are no files associated with this item.
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.