Management and Entrepreneurship
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 of Applied Business Research
Cordeiro, James J., Rajaram Veliyath, and Donald O. Neubaum. "Incentives for Monitors: Director Stock-Based Compensation and Firm Performance." Journal of Applied Business Research 21.2 (2005): 81-90. Print.