Stock-Based versus Cash Compensation: Does the Correlation between Earnings and Stock Returns Matter?
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I empirically examine the role of the correlation between earnings and stock returns in determining the structure of compensation packages for top executives. I develop two competing hypotheses on the relation between the returns-earnings correlation and the structure of executive compensation and empirically test the association between the returns-earnings correlation and use of stock-based pay. The results show that the returns-earnings correlation is positively associated with the use of stock-based compensation, after controlling for other determinants of stock-based compensation such as firm size and firm’s growth opportunities.
Abstract
I empirically examine the role of the correlation between earnings and stock returns in determining the structure of compensation packages for top executives. I develop two competing hypotheses on the relation between the returns-earnings correlation and the structure of executive compensation and empirically test the association between the returns-earnings correlation and use of stock-based pay. The results show that the returns-earnings correlation is positively associated with the use of stock-based compensation, after controlling for other determinants of stock-based compensation such as firm size and firm’s growth opportunities.
참고문헌 (68)
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