Activities per year
Abstract
Stock options and restricted stock are the two main vehicles of equity-based compensation. In this paper, we analyze how different dividend treatment of stock options and restricted stock grants impacts stock price and the riskiness of the firm. We find that if a firm's manager's utility function includes contemporaneous dividends (as in the case of restricted stock grants), the manager increases the risk level of equity in order to maintain the preferred risk level of her utility function. Increased risk level negatively impacts stock price, ceteris paribus. However, the calibrated model reveals that the impacts are rather trivial, specifically, equity value is lower by 1.5% and leverage is greater by 4%.
Original language | English |
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Pages (from-to) | 16-24 |
Number of pages | 9 |
Journal | Economic Modelling |
Volume | 71 |
DOIs | |
Publication status | Published - Apr 2018 |
Keywords
- Dividends
- Firm value
- Restricted stock grants
- Stock options
Fingerprint
Dive into the research topics of 'The impact of dividend-protected CEO equity incentives on firm value and risk'. Together they form a unique fingerprint.Activities
- 1 Invited talk
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Impact of Different Dividend Treatment of Restricted Stock and Option Grants on Equity Value
Fan Yu (Speaker)
16 Oct 2015Activity: Talk or presentation › Invited talk
Research output
- 3 Citations
- 1 Article
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Managerial risk incentives and a firm’s financing policy
Karpavičius, S. & Yu, F., Mar 2019, In: Journal of Banking and Finance. 100, p. 167-181 15 p.Research output: Contribution to journal › Article › peer-review
11 Citations (Scopus)