Restricted Stock Versus Other Sources of Managerial Incentives Academic Article uri icon

abstract

  • The number of firms granting restricted stock and the proportion of incentive compensation it represents increased dramatically over the last several years. Firm value is positively related to incentives from restricted stock, but is unrelated to incentives from unrestricted stock and vested and unvested options. We document that the mean vesting period for restricted stock is longer than that of the other incentive sources, and then study the effects of restricted stock in the context of corporate acquisitions, which are long-term investments. Acquirer announcement returns are positively related to restrict stock incentives, but are unrelated to incentives from the other incentive sources. Restricted stock incentives also positively affect pre- to post-acquisition changes in operating performance and negatively affect premiums paid for targets. The positive effect of restricted stock incentives on acquirer returns is driven by incentives with long vesting periods.

author list (cited authors)

  • Chi, J. D., & Johnson, S. A.

complete list of authors

  • Chi, Jianxin Daniel||Johnson, Shane A

publication date

  • March 2008