Executive_Compensation_SEO_Final_Version.pdf (1023.76 kB)
Executive compensation structure and the motivations for seasoned equity offerings
journal contribution
posted on 2023-06-10, 02:42 authored by Eric R Brisker, Don M Autore, Gonal ColakGonal Colak, David R PetersonWe hypothesize that managers who receive high equity-based compensation have greater incentive to avoid ownership dilution by timing their seasoned equity offers to periods when investors temporarily overvalue their stock. We provide empirical support for this hypothesis using a measure of equity-based compensation that reflects the sensitivity of the top five executives' wealth (based on ownership of stock, options, and restricted shares) to a 1% change in stock price. We find that firms associated with high equity-based compensation for top executives experience abnormally low stock returns and relatively unfavorable changes in operating performance in the three-year period following the issue. Overall, the findings support the premise that managers whose wealth is most sensitive to stock price changes are more likely to act in the interest of current shareholders by issuing equity when they believe their stock is overvalued.
History
Publication status
- Published
File Version
- Accepted version
Journal
Journal of Banking and FinanceISSN
0378-4266Publisher
ElsevierExternal DOI
Volume
40Page range
330-345Department affiliated with
- Accounting and Finance Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2022-02-22First Open Access (FOA) Date
2022-02-22First Compliant Deposit (FCD) Date
2022-02-22Usage metrics
Categories
No categories selectedKeywords
Licence
Exports
RefWorks
BibTeX
Ref. manager
Endnote
DataCite
NLM
DC