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dc.contributor.authorRosser, B.en
dc.contributor.authorCanil, J.en
dc.identifier.citationCorporate Ownership and Control, 2008; 6(1):115-126en
dc.description© 2008 Social Science Electronic Publishing, Incen
dc.description.abstractSchaefer (1998) and Baker and Hall (2004) posit a firm size effect for regular executive compensation but not specifically for executive stock option grants. They propose an inverse relation between pay-performance sensitivity and firm size along with a positive relation between the marginal productivity of executive effort and firm size. The product of pay-performance sensitivity and executive productivity is 'incentive strength'. They find a weakly positive association between incentive strength and firm size. We substitute Hall and Murphy's (2002) pay-performance sensitivity metric to detect a firm size effect in CEO stock option grants. After adjusting for small-firm risk aversion and private diversification 'clienteles', we document evidence of a residual small-firm effect impacting on incentive strength principally through grant size. Given lower small-firm deltas, grant size appears to have been increased by compensation committees to ensure small-firm CEOs are not under-compensated relative to their large-firm counterparts. We also find that firm complexity influences pay-performance sensitivity as well, but not labor productivity (proxying for CEO productivity). No evidence is found that firm smallness and complexity impact on labor productivity. However, we empirically confirm a negative relation between pay-performance sensitivity and firm smallness and, by implication, firm complexity.en
dc.publisherVirtus Interpressen
dc.subjectexecutive stock options; pay-performance sensitivity; firm sizeen
dc.titleIs there a firm-size effect in CEO stock option grants?en
dc.typeJournal articleen
pubs.library.collectionBusiness School publicationsen
dc.identifier.orcidCanil, J. [0000-0002-3646-4320]en
Appears in Collections:Business School publications

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