← Search

Equity Vesting and Investment

Alex Edmans¹; Vivian W. Fang²; Katharina A. Lewellen³

¹ London Business School, CEPR, and ECGI · ² Carlson School of Management, University of Minnesota · ³ Tuck School of Business at Dartmouth

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.

DOI

10.1093/rfs/hhx018

Volume

30 (7)

Pages

2229-2271

Language

en

Export

BibTeX

Sources

openalex crossref