L71 PhD Thesis Mohammed_Sualihu 26329204_Redacted.pdf (1.08 MB)
The Role of Equity Compensation in Reducing Inefficient Investment in Labour
thesis
posted on 2019-03-13, 00:40 authored by MOHAMMED AMINU SUALIHUThis thesis examines whether equity compensation incentivises executives to make efficient labour investment decisions. Specifically, it examines whether the components of equity compensation — stock options and restricted stock — affect over- and under-investment in labour. Based on a sample of 12118 firm-year observations from 1992 to 2014, it is found that stock options exacerbate over-investment and mitigate under-investment in labour. In contrast, restricted stock is found to mitigate both over- and under-investment in labour. Overall, the findings demonstrate that stock options and restricted stock matter in executives’ labour investment decisions.