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The Propensity to Split and CEO Compensation

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  • Erik Devos
  • William B. Elliott
  • Richard S. Warr

Abstract

We analyze the relation between the delta and vega of a chief executive officer's (CEO) compensation and the propensity of the firm to engage in a split. Controlling for other well†known factors, we find that CEOs with compensation that has higher levels of delta are more likely to split their shares. Furthermore, the choice of split factor is inversely related to delta. Our results are economically significant: for the average (median) firm in our sample, a stock split results in a CEO wealth gain of $4.9 million ($84,000).

Suggested Citation

  • Erik Devos & William B. Elliott & Richard S. Warr, 2018. "The Propensity to Split and CEO Compensation," Financial Management, Financial Management Association International, vol. 47(1), pages 105-129, March.
    • Handle: RePEc:bla:finmgt:v:47:y:2018:i:1:p:105-129
    DOI: 10.1111/fima.12179
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    2. Maretno A. Harjoto & Dongshin Kim & Indrarini Laksmana & Richard C. Walton, 2019. "Corporate social responsibility and stock split," Review of Quantitative Finance and Accounting, Springer, vol. 53(2), pages 575-600, August.

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