Incentive effects of performance-vested stock options

Y. Kuang

Research output: ThesisDoctoral ThesisScientific

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Abstract

This dissertation investigates the effects of PVSOs in motivating managers to promote shareholder value. Undesired consequences associated with PVSOs are also examined. Chapter 2 studies the effectiveness of PVSOs in aligning interests between managers and shareholders. Chapter 3 explores managers’ propensity to engage in earnings management when PVSOs are used in compensation. In an agency setting, Chapter 4 compares the incentive effects of PVSOs with TSOs in inducing managerial effort. Chapters 2 and 3 illustrate two sides of one coin: option vesting targets incentivize managers to work in the shareholders’ best interest but at the same time, these targets also provide managers with incentive to manage earnings. Incorporating the effects of earnings management into the analysis, Chapter 4 shows positive net effects of PVSOs in motivating managers. More specifically, with appropriately defined performance targets, PVSOs will still induce higher economic effort from managers than TSOs.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
Supervisors/Advisors
  • van Lent, Laurence, Promotor
  • Suijs, Jeroen, Co-promotor
Award date30 Oct 2007
Place of PublicationTilburg
Publisher
Print ISBNs9789056681975
Publication statusPublished - 2007

Fingerprint

Stock options
Managers
Incentive effect
Shareholders
Earnings management
Shareholder value
Economics
Incentives
Propensity

Cite this

Kuang, Y. (2007). Incentive effects of performance-vested stock options. Tilburg: CentER, Center for Economic Research.
Kuang, Y.. / Incentive effects of performance-vested stock options. Tilburg : CentER, Center for Economic Research, 2007. 145 p.
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author = "Y. Kuang",
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Kuang, Y 2007, 'Incentive effects of performance-vested stock options', Doctor of Philosophy, Tilburg University, Tilburg.

Incentive effects of performance-vested stock options. / Kuang, Y.

Tilburg : CentER, Center for Economic Research, 2007. 145 p.

Research output: ThesisDoctoral ThesisScientific

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AU - Kuang, Y.

PY - 2007

Y1 - 2007

N2 - This dissertation investigates the effects of PVSOs in motivating managers to promote shareholder value. Undesired consequences associated with PVSOs are also examined. Chapter 2 studies the effectiveness of PVSOs in aligning interests between managers and shareholders. Chapter 3 explores managers’ propensity to engage in earnings management when PVSOs are used in compensation. In an agency setting, Chapter 4 compares the incentive effects of PVSOs with TSOs in inducing managerial effort. Chapters 2 and 3 illustrate two sides of one coin: option vesting targets incentivize managers to work in the shareholders’ best interest but at the same time, these targets also provide managers with incentive to manage earnings. Incorporating the effects of earnings management into the analysis, Chapter 4 shows positive net effects of PVSOs in motivating managers. More specifically, with appropriately defined performance targets, PVSOs will still induce higher economic effort from managers than TSOs.

AB - This dissertation investigates the effects of PVSOs in motivating managers to promote shareholder value. Undesired consequences associated with PVSOs are also examined. Chapter 2 studies the effectiveness of PVSOs in aligning interests between managers and shareholders. Chapter 3 explores managers’ propensity to engage in earnings management when PVSOs are used in compensation. In an agency setting, Chapter 4 compares the incentive effects of PVSOs with TSOs in inducing managerial effort. Chapters 2 and 3 illustrate two sides of one coin: option vesting targets incentivize managers to work in the shareholders’ best interest but at the same time, these targets also provide managers with incentive to manage earnings. Incorporating the effects of earnings management into the analysis, Chapter 4 shows positive net effects of PVSOs in motivating managers. More specifically, with appropriately defined performance targets, PVSOs will still induce higher economic effort from managers than TSOs.

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Kuang Y. Incentive effects of performance-vested stock options. Tilburg: CentER, Center for Economic Research, 2007. 145 p. (CentER Dissertation Series).