publication . Article . 2009

Stock Option Compensation and Managerial Turnover

Raluca Georgiana NASTASESCU;
Open Access
  • Published: 01 Jan 2009 Journal: REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, volume 10, issue 2 May, pages 352-366
This study examines the association between managerial turnover and equity-based compensation. I investigate whether stock options act to bond executives to their firms and whether retention of managers is a motivation of companies in designing CEO incentive contracts. The results show that stock options do negatively influence the probability of a CEO leaving the company. The monetary cost of losing the value of equity-based compensation package keeps the manager with his company. I also find that in deciding upon a CEO's compensation scheme, firms take into account the probability of a CEO resigning from the company in the next period and award more stock opti...
ACM Computing Classification System: ComputingMilieux_THECOMPUTINGPROFESSION
free text keywords: managerial retention; executive compensation; stock options; turnover; ownership., jel:J63, jel:R53

Balsam S, Gifford R, Kim S, (2007) “ The Effect of Stock Option Grants on Voluntary Employee Turnover”, Review of Accounting and Finance, 43:95- 119. [OpenAIRE]

Balsam S, Miharjo S, (2007) “The Effect of Equity Compensation on Voluntary Executive Turnover”, Journal of Accounting and Economics, 43:95-119. [OpenAIRE]

1 Moore H. For Boutiques, Time to Shop as Bankers Flee Big Firms [document on the internet]. The Wall Street Journal, 2009 [cited 2009 Feb 10]. Available:

2 Byrnes N, Francis T, Executive Pay: Will the Big Bucks Stop Here? [document on the internet]., 2009 [cited 2009 Feb 10]. Available:

3. Coughlan A, Schmidt R, (1985) “Executive Compensation, Management Turnover, and Firm Performance: An Empirical Investigation”, Journal of Accounting and Economics,7(13):43-66.

4. Fee CE, Hadlock CJ, Raids, (2003) “Rewards, and Reputations in the Market for Managerial Talent”, Review of Financial Studies,16 (4):1315- 1357. [OpenAIRE]

5. Gonzales LG, Gurtoviy R, (2006) How Much to Pay in Cash? Employee Retention via Stock Options, Max Planck Institute for Research into Economic Systems, Discussion Papers on Strategic Interaction, 24:2-20.

6. Hadlock C, Lumer GB, (1997) “Compensation, Turnover, and Top Management Incentives: Historical Evidence”, The Journal of Business70 (2):153-187.

7. Hasenhuttl M, Harrison JR, (2002) Exit or Loyalty: The Effects of Compensation on CEO Turnover, Working Paper, University of Texas, Dallas.

8. Henderson A, Miller D, Starks L, (2006) “ How Quickly Do CEOs Become Obsolete? Industry Dynamism, CEO Tenure and Company Performance”, Strategic Management Journal, 27:447-460.

9. Huson M, Malatesta P, Parrino R, (2004) “Managerial Succession and Firm Performance”, Journal of Financial Economics, 74:237-275. [OpenAIRE]

10. Mehran H, Yermack D, (1999) Compensation and Top Management Turnover. Working Paper, Kellog Graduate School of Management, 2-35

11. Nastasescu R.G, (2009) “The Role of Equity-Based Plans” in Managerial Compensation Schemes: An Investigation of CEOs Risky Investment Decisions and Executive Turnover, PhD [Dissertation]. Northern Illinois University, Dekalb. [OpenAIRE]

12. Smith RJ, Blundell R.W, (1986) “An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply”, Econometrica, 54(4):679-686.

13. Subramanian N, Chakraborty A, Sheikh S, (2007) “Repricing and Executive Turnover”, The Financial Review, 42:121-141.

Powered by OpenAIRE Research Graph
Any information missing or wrong?Report an Issue