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|dc.identifier.citation||Corporate Ownership and Control, 2008; 6(1):115-126||en|
|dc.description||© 2008 Social Science Electronic Publishing, Inc||en|
|dc.description.abstract||Schaefer (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.subject||executive stock options; pay-performance sensitivity; firm size||en|
|dc.title||Is there a firm-size effect in CEO stock option grants?||en|
|pubs.library.collection||Business School publications||en|
|dc.identifier.orcid||Canil, J. [0000-0002-3646-4320]||en|
|Appears in Collections:||Business School publications|
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