Department

Management and Entrepreneurship

Document Type

Article

Publication Date

Spring 2005

Abstract

Since the mid-1990s, US corporations have increasingly emphasized stock-based compensation for outside directors in order to align their interests with stockholders and thus boost firm performance. We demonstrate that stock options and stock grants (each as a ratio relative to total compensation) for directors were positively related to future firm performance (measured as stock returns, and, separately, as Jensen`s Alpha) for a panel of 450 Standard and Poor 500 finns over 1995-97. Stock option ratios appeared to have a stronger impact on firm performance than stock grants did.

Journal Title

Journal of Applied Business Research

Journal ISSN

0892-7626

Volume

21

Issue

2

First Page

81

Last Page

90

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