I thank William T. Moore (the editor), R. Charles Moyer (the referee), Ajay Khorana, Eric Chang, Edward Nelling, Sanjiv Sabherwal, Kewei Hou, Marc Zenner, John Core, and seminar participants at the Georgia Institute of Technology, the Western Finance Association meetings, the Financial Management Association meetings, the Eastern Finance Association meetings, and the Southern Finance Association meetings for helpful comments and suggestions. I also thank Jonathon K. Cook with Fidelity Investments for helping me obtain proxy statements and annual reports.
Equity-Based Compensation for Employees: Firm Performance and Determinants
Version of Record online: 9 FEB 2004
Journal of Financial Research
Volume 27, Issue 1, pages 31–54, March 2004
How to Cite
Frye, M. B. (2004), Equity-Based Compensation for Employees: Firm Performance and Determinants. Journal of Financial Research, 27: 31–54. doi: 10.1111/j.1475-6803.2004.00076.x
- Issue online: 9 FEB 2004
- Version of Record online: 9 FEB 2004
I examine the effect of employee equity-based compensation (EBC) on firm performance and the determinants of EBC. Using two samples, I find that firms have come to rely more heavily on EBC than in the past. For both samples, I document a significant, positive relation between Tobin's q and the percentage of employee compensation that is equity based. For accounting returns, I find a positive relation with the earlier sample. However, for the later sample I find that greater use of EBC leads to lower levels of future accounting returns. I also find that the determinants of the proportion of EBC are different between the two samples.