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Executive equity incentive plans: Effective golden handcuffs?

Author

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  • Liu, Baohua
  • Zhang, Nihui
  • Chan, Kam C.
  • Chen, Yining
  • Qiu, Xuemei

Abstract

We examine the impact of executive equity incentive plans (EEIPs) on the retention of targeted (those subject to EEIPs) and non-targeted (those not subject to EEIPs) executives using a sample of Chinese firms. Our findings suggest that EEIPs help retain executives if we do not distinguish targeted and non-targeted executives. Using a difference-in-differences research design, we find that, on average, targeted (non-targeted) executives in EEIP firms have an approximately 16% lower (43% higher) chance of leaving their current jobs than the average turnover rate of executives in a non-EEIP firm. Additional analysis suggests that 1) the golden-handcuff effect on targeted executives occurs primarily in the first two years of EEIPs, while the push-away effect on non-targeted executives lasts for four years, and 2) non-targeted executives are more likely to leave when they have low compensation.

Suggested Citation

  • Liu, Baohua & Zhang, Nihui & Chan, Kam C. & Chen, Yining & Qiu, Xuemei, 2024. "Executive equity incentive plans: Effective golden handcuffs?," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 83-97.
    • Handle: RePEc:eee:reveco:v:91:y:2024:i:c:p:83-97
    DOI: 10.1016/j.iref.2024.01.003
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