TY - JOUR
T1 - Incentives, targeting, and firm performance
T2 - An analysis of non-executive stock options
AU - Hochberg, Yael V.
AU - Lindsey, Laura
PY - 2010/11
Y1 - 2010/11
N2 - We examine whether options granted to non-executive employees affect firm performance. Using new data on option programs, we explore the link between broad-based option programs, option portfolio implied incentives, and firm operating performance, utilizing an instrumental variables approach to identify causal effects. Firms whose employee option portfolios have higher implied incentives exhibit higher subsequent operating performance. Intuitively, the implied incentive-performance relation is concentrated in firms with fewer employees and in firms with higher growth opportunities. Additionally, the effect is concentrated in firms that grant options broadly to non-executive employees, consistent with theories of cooperation and mutual monitoring among co-workers.
AB - We examine whether options granted to non-executive employees affect firm performance. Using new data on option programs, we explore the link between broad-based option programs, option portfolio implied incentives, and firm operating performance, utilizing an instrumental variables approach to identify causal effects. Firms whose employee option portfolios have higher implied incentives exhibit higher subsequent operating performance. Intuitively, the implied incentive-performance relation is concentrated in firms with fewer employees and in firms with higher growth opportunities. Additionally, the effect is concentrated in firms that grant options broadly to non-executive employees, consistent with theories of cooperation and mutual monitoring among co-workers.
UR - http://www.scopus.com/inward/record.url?scp=77958561778&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=77958561778&partnerID=8YFLogxK
U2 - 10.1093/rfs/hhq093
DO - 10.1093/rfs/hhq093
M3 - Article
AN - SCOPUS:77958561778
SN - 0893-9454
VL - 23
SP - 4148
EP - 4186
JO - Review of Financial Studies
JF - Review of Financial Studies
IS - 11
ER -