Equity vesting and investment

Alex Edmans, Vivian W. Fang, Katharina A. Lewellen

Research output: Contribution to journalArticlepeer-review

158 Scopus citations


This paper links the CEO's concerns for the current stock price to reductions in real investment. We identify short-term concerns using the amount of stock and options scheduled to vest in a given quarter.Vesting equity is associated with a decline in the growth of research and development and capital expenditure, positive analyst forecast revisions, and positive earnings guidance, within the same quarter. More broadly, by introducing a measure of incentives that is determined by equity grants made several years prior, and thus unlikely driven by current investment opportunities, we provide evidence that CEO contracts affect real decisions.

Original languageEnglish (US)
Pages (from-to)2229-2271
Number of pages43
JournalReview of Financial Studies
Issue number7
StatePublished - Jul 1 2017
Externally publishedYes

Bibliographical note

Publisher Copyright:
© The Author 2017.


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