Journal of Financial and Quantitative Analysis Vol. 60 No. 7 2025
Value-Based CEO Equity Grants
Abstract
We document firms often determine CEO equity grants based on a predetermined dollar value (value-based equity grant) instead of on the number of shares (share-based grant). Value-based equity grants weaken the relationship between stock performance and CEO equity pay, lower CEO portfolio delta, and slow firms’ investment in R&D. We find that retention pressure is a key reason for the use of value-based equity pay, while governance could also matter. Overall, this paper alerts boards to the unintended consequences of pursuing a target pay level or pay structure because such practices can lead to value-based equity grants in CEO compensation.
- DOI
- 10.1017/s0022109025000018
- Volume
- 60
- Issue
- 7
- Pages
- 3514-3550
- Language
- en
- Sources
- openalex crossref