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Managerial shareholding policies and retention of vested equity incentives / Piotr Korczak; Xicheng Liu

Journal of Empirical Finance, Volume: 27, Pages: 116 - 129

Swansea University Author: Xicheng, Liu

DOI (Published version): 10.1016/j.jempfin.2013.10.010

Abstract

Previous studies show that corporate executives tend to liquidate equity incentives when equity-based compensation vests. This undermines long-term incentives and destroys shareholders value. It is suggested that the unwinding incentives can be limited when the firm adopts a minimum executive shareh...

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Published in: Journal of Empirical Finance
Published: 2013
Online Access: http://www.sciencedirect.com/science/article/pii/S0927539813000777
URI: https://cronfa.swan.ac.uk/Record/cronfa21940
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Abstract: Previous studies show that corporate executives tend to liquidate equity incentives when equity-based compensation vests. This undermines long-term incentives and destroys shareholders value. It is suggested that the unwinding incentives can be limited when the firm adopts a minimum executive shareholding policy. We provide the first evidence of the effectiveness of such policies. Using data for UK FTSE 350 companies, we find that executives whose shareholding is below the policy minimum retain more newly vested equity, and the incentives to retain shares decreases when executive shareholdings are above the policy minimum. We also find higher firm valuations when executive share ownership increases relative to the minimum holdings required. Our results have important implications for the debate on executive remuneration regulations.
Item Description: "Available online 6 November 2013"
Keywords: Managerial shareholding, compensation
College: School of Management
Start Page: 116
End Page: 129