Work detail

Equity incentives and company performance

Author: Mgr. Theodor Šářec
Year: 2019 - winter
Leaders: prof. Ing. Evžen Kočenda M.A., Ph.D., DSc.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 55
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/199416/
Abstract: The equity-based incentives are considered to be one of the instruments helping to
motivate executives. The use of this compensation framework should in theory tackle
and mitigate the agency problems, and prevent the possible attempts of managers to
pursue their own interest over the interests of shareholders. The literature focusing on
the effects differs greatly. There is no conformity over the effect of equity compensation
on company performance. This research study the effect of CEO-related equity
incentives and stock ownership on company performance. The main finding is the
positive effect of the equity incentives measured by the percentage of CEOs’ equitybased compensation on company performance proxied by the change in Tobin’s Q. The
thesis does not find any significant effect of insiders’ stock ownership. The dataset of
107 publicly traded US companies is used for the empirical analysis. The results are
estimated based on a fixed effects model and pooled ordinary least squares. This thesis
contributes to the ongoing debate over the effects. It also widens the narrow literature
on the structure of compensation.

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