How does CEO equity-based compensation affect firm’s propensity of issuing new securities?
How does CEO equity-based compensation affect firm’s propensity of issuing new securities?
CEO equity-based compensation is designed to reduce the agency problem between top management and shareholders, which should have direct consequences on firm’s capital structure decisions as evidenced by the behaviors of new security issuances. This research paper focuses on the impact on the propensity of issuing new securities by two common CEO equity-based compensations – option compensation and restricted stock compensation. Empirical results show that CEO option compensation yields statisti