Managerial shareholding policies and retention of vested equity incentives

Piotr Korczak, Xicheng Liu

Research output: Contribution to journalArticle (Academic Journal)peer-review

5 Citations (Scopus)


Previous literature documents that executives tend to cash out equity incentives when equity-linked compensation vests. Such a behavior destroys long-term incentives and hence is costly to outside shareholders. It is recommended that the unloading of incentives can be limited when the firm adopts a minimum executive shareholding policy. We provide the first evidence of the effectiveness of such policies in that respect. Using data for UK FTSE 350 companies we show that executives whose ownership is below the minimum set by the policy retain more newly vesting equity and the incentives to retain shares weaken when the holdings are above the minimum. We also document economic implications of compliance with the policy and we find higher firm valuations when actual ownership increases relative to the minimum holdings required. Our results have implications for the debate on executive remuneration regulations and practices.
Original languageEnglish
Pages (from-to)116-129
Number of pages14
JournalJournal of Empirical Finance
Publication statusPublished - 1 Jun 2014


Dive into the research topics of 'Managerial shareholding policies and retention of vested equity incentives'. Together they form a unique fingerprint.

Cite this