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- Title
Equity Vesting and Investment.
- Authors
Edmans, Alex; Fang, Vivian W.; Lewellen, Katharina A.
- Abstract
This paper links the CEO's concerns for the current stock price to reductions in real investment. We identify short-term concerns using the amount of stock and options scheduled to vest in a given quarter. Vesting equity is associated with a decline in the growth of research and development and capital expenditure, positive analyst forecast revisions, and positive earnings guidance, within the same quarter. More broadly, by introducing a measure of incentives that is determined by equity grants made several years prior, and thus unlikely driven by current investment opportunities, we provide evidence that CEO contracts affect real decisions.
- Subjects
STOCK prices; CHIEF executive officers; VESTED benefits; STOCK options; EXECUTIVE compensation; ATTITUDE (Psychology)
- Publication
Review of Financial Studies, 2017, Vol 30, Issue 7, p2229
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/hhx018