The Effect of Equity Compensation on Voluntary Executive Turnover

Posted: 5 Oct 2006

See all articles by Steven Balsam

Steven Balsam

Temple University - Department of Accounting

Setiyono Miharjo



Equity compensation provides incentives for executives to remain with the firm to avoid forfeiture of restricted shares and some or all of the value of stock options held. Empirically we show that the intrinsic value of unexercisable in-the-money options, the time value of unexercised options, and the value of restricted shares are inversely related to voluntary executive turnover. These findings which are most pronounced for strong performers, hold for CEOs and non-CEOs alike. While paying excess cash compensation also reduces turnover, the effect is less pronounced than that of equity compensation.

Keywords: Executive Compensation, Executive Retention, Equity Compensation

Suggested Citation

Balsam, Steven and Miharjo, Setiyono, The Effect of Equity Compensation on Voluntary Executive Turnover. Journal of Accounting & Economics, Forthcoming, Available at SSRN:

Steven Balsam (Contact Author)

Temple University - Department of Accounting ( email )

306 Speakman Hall
Philadelphia, PA 19122
United States
215-204-5574 (Phone)
215-204-5587 (Fax)


Setiyono Miharjo


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