Premium
The Propensity to Split and CEO Compensation
Author(s) -
Devos Erik,
Elliott William B.,
Warr Richard S.
Publication year - 2017
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12179
Subject(s) - chief executive officer , executive compensation , compensation (psychology) , stock (firearms) , stock options , sample (material) , business , demographic economics , delta , economics , management , psychology , finance , social psychology , geography , engineering , chemistry , archaeology , chromatography , aerospace engineering
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).