Replacing executive stock options with share units: A Canadian study |
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Authors: | Alexandre Savoie-Comeau Tania M Morris |
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Institution: | Accounting Department, University of Moncton, Moncton, New Brunswick, Canada |
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Abstract: | Are share units a better compensation tool than stock options? This paper studies the impact of a transition within the compensation structures of CEOs of companies listed on the TSX Composite Index. Specifically, we ask whether replacing options with units-based compensation reduces the volatility of these companies' stock prices while promoting better returns. Our findings show that a shift to share units reduces large-cap Canadian companies' total risk through its idiosyncratic component. This transition is also accompanied by an increase in their risk-adjusted accounting and market performance. This suggests that share units are better for compensation contracts. |
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Keywords: | compensation structure risk risk-adjusted performance share units transition performance standardisée risque structure de rémunération transition unités d'actions |
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