We show that executives cut investment when their incentives become more short-term. We examine a unique event in which hundreds of firms eliminated option vesting periods to avoid a drop in income under accounting rule FAS 123-R. This event allowed executives to exercise options earlier and...

We document that firms can effectively retain executives by granting deferred equity pay. We show this by analyzing a unique regulatory change (FAS 123-R) that prompted 723 firms to suddenly eliminate stock option vesting periods. This allowed CEOs to keep 33% more options when departing the...

We show that firm valuations fell after a key expense became more visible in financial statements. FAS 123-R required firms to deduct option compensation costs from earnings, instead of disclosing them only in footnotes. Firms that granted high option pay experienced a significant earnings...

We argue that the recent corporate governance reform in the Netherlands provides a natural experiment to explore the impact of changes in corporate governance on financing policy. We find that, relative to a control sample of comparable firms outside the Netherlands, Dutch firms significantly...

In this paper, we investigate the attitudes of institutional investors, such as hedge funds, insurance companies, mutual funds and pension funds, towards a key corporate governance mechanism, namely executive compensation. We document the preferences they have about both the level and structure...

We exploit an exogenous shock to corporate ownership structures created by a recent tax reform in Germany to explore the link between corporate governance and internal capital markets. We find that firms with more concentrated ownership are less diversified and have more efficient internal...