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Stock based compensation: firm-specific risk, efficiency and incentives

Abstract:

This paper examines the efficiency of stock based compensation by valuing stock and options from the executive's point of view. Companies give compensation in the form of stock in order to align incentives by providing a link between executive wealth and the stock price performance of the company. However, it requires the executive to be exposed to firm-specific risk, and thus hold a less than fully diversified portfolio. Since firm-specific risk is not priced, this leads to the executive pla...

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Publication status:
Published

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Publisher:
University of Oxford
Series:
Department of Economics Discussion Paper Series
Publication date:
2001-11-01
Paper number:
2002-FE-01
Keywords:
Pubs id:
1144334
Local pid:
pubs:1144334
Deposit date:
2020-12-15

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