CEO stock-based compensation: An empirical analysis of incentive-intensity, relative mix, and economic determinants

The use of stock-based compensation for U.S. CEOs has increased significant ly throughout the 1990s. Research interest, in particular on stock option c ompensation, has similarly increased, yet co tradictory results create ques tions about the theoretical underpinnings. Therefore, we revisit the contro versy surrounding stock option awards, and we further the understanding of restricted stock grants, which have escaped similar research focus. Using a recent data set, we obtain convincing empirical support for most theoretic al predictions about stock option awards. We also find that restricted stoc k, due to its linear payoffs, is relatively inefficient in inducing risk-av erse CEOs to accept risky, value-increasing investment projects.