Business, Management and Accounting
4 years ago

Firms strategically use equity grants to optimize CEO incentives.

Journal of Accounting and Economics
The use of equity grants to manage optimal equity incentive levels
John E. Core, Wayne R. Guay

Paper Summary

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Firms give CEOs stock and options to make sure they have the right amount of motivation. They use a model to figure out how much stock and options CEOs should have. When CEOs have too much or too little, firms give them more stock and options to fix it. This shows that firms give CEOs the right amount of incentives to work hard.