The Retention Effects of Unvested Equity: Evidence from Accelerated Option Vesting

Posted by Torsten Jochem (University of Amsterdam), Tomislav Ladika (University of Amsterdam), Zacharias Sautner (Frankfurt School of Finance & Management), on Saturday, March 3, 2018 Editor's Note: Torsten Jochem is Assistant Professor of Finance at the University of Amsterdam; Tomislav Ladika is Assistant Professor of Finance at the University of Amsterdam; and Zacharias Sautner is Professor of Finance at Frankfurt School of Finance & Management. This post is based on their recent article, forthcoming in The Review of Financial Studies. Demand for general human capital is rising across the economy, which makes it important to understand how firms can retain highly talented managers. One key retention mechanism is to defer parts of managers’ compensation into the future, by granting equity that does not vest for several years. Managers who voluntarily depart their firms typically forfeit unvested equity, which raises their…

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