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A test of the Bolton–Scheinkman–Xiong hypothesis of how speculation affects the vesting time of options granted to directors

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  • Egger, Peter
  • Radulescu, Doina

Abstract

This paper investigates empirically the Bolton et al. (2006) hypothesis, according to which initial shareholders may provide incentives to managers to take actions that stimulate speculative bubbles. We test this hypothesis with data on up to 8544 directors and up to 1677 companies between 2004–2008. Using vesting time as a measure of the short-term performance weighting in CEO compensation and various alternative measures of the extent of speculation, the findings support the hypothesis: vesting time decreases with more intensive speculation. The results prove robust in various empirical model specifications.

Suggested Citation

  • Egger, Peter & Radulescu, Doina, 2014. "A test of the Bolton–Scheinkman–Xiong hypothesis of how speculation affects the vesting time of options granted to directors," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 511-519.
    • Handle: RePEc:eee:corfin:v:29:y:2014:i:c:p:511-519
    DOI: 10.1016/j.jcorpfin.2014.09.005
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    Cited by:

    1. Chi, Jianxin Daniel & Gupta, Manu & Johnson, Shane A., 2020. "Short-horizon incentives and stock price inflation," Journal of Corporate Finance, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Vesting time; Executive compensation; Speculative markets;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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