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Managerial shareholding policies and retention of vested equity incentives

Piotr Korczak, Xicheng Liu Orcid Logo

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

Swansea University Author: Xicheng Liu Orcid Logo

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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first_indexed 2015-06-04T02:09:35Z
last_indexed 2019-07-30T15:07:50Z
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spelling 2019-07-30T09:49:35.3186829 v2 21940 2015-06-03 Managerial shareholding policies and retention of vested equity incentives 41d0d1b9f5dbbb7c1f7887569db233e1 0000-0002-5859-4249 Xicheng Liu Xicheng Liu true false 2015-06-03 BAF 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. Journal Article Journal of Empirical Finance 27 116 129 Managerial shareholding, compensation 31 12 2013 2013-12-31 10.1016/j.jempfin.2013.10.010 http://www.sciencedirect.com/science/article/pii/S0927539813000777 "Available online 6 November 2013" COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2019-07-30T09:49:35.3186829 2015-06-03T12:30:04.6736429 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Piotr Korczak 1 Xicheng Liu 0000-0002-5859-4249 2 0021940-18122015150103.pdf LiuManagerialshareholdingpoliciesandretentionofvestedequityincentivesPostPrint.pdf 2015-12-18T15:01:03.2970000 Output 983971 application/pdf Accepted Manuscript true 2015-12-18T00:00:00.0000000 false
title Managerial shareholding policies and retention of vested equity incentives
spellingShingle Managerial shareholding policies and retention of vested equity incentives
Xicheng Liu
title_short Managerial shareholding policies and retention of vested equity incentives
title_full Managerial shareholding policies and retention of vested equity incentives
title_fullStr Managerial shareholding policies and retention of vested equity incentives
title_full_unstemmed Managerial shareholding policies and retention of vested equity incentives
title_sort Managerial shareholding policies and retention of vested equity incentives
author_id_str_mv 41d0d1b9f5dbbb7c1f7887569db233e1
author_id_fullname_str_mv 41d0d1b9f5dbbb7c1f7887569db233e1_***_Xicheng Liu
author Xicheng Liu
author2 Piotr Korczak
Xicheng Liu
format Journal article
container_title Journal of Empirical Finance
container_volume 27
container_start_page 116
publishDate 2013
institution Swansea University
doi_str_mv 10.1016/j.jempfin.2013.10.010
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://www.sciencedirect.com/science/article/pii/S0927539813000777
document_store_str 1
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description 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.
published_date 2013-12-31T03:26:04Z
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score 10.95092