This paper explores to find out the determinants of the change of CEO equity-based\ncompensation structure. We use the US nonfinancial listed companies as sample and find that\nwhen the change of stock return and size increase positively, the percentage of stock\ncompensation and the stock-minus-option compensation relative to last year increase.\nMoreover, when the change of CEO duality increases positively, the percentage of\nstock-compensation and the percentage of stock-minus-option compensation relative to last\nyear decrease. The empirical results represent that when firms perform better, sizes are bigger,\nand when there is a supervision mechanism of CEOs, stock compensation relative to last year\nwill rise. Furthermore, the change of entrenchment index is positively correlated with\nequity-based compensation relative to last year. We also investigate the relation between\nequity-based compensation and risk-taking. Option compensation will increase firms� stock\nreturn risk, but stock compensation will decrease firms� stock return risk. Although there is no\nobvious conclusion that whether stocks or options are better, this study shows that stock\ncompensation dominates option compensation in the view of risk-taking. We recommend that\nexecutive equity-based compensation should mostly consist of restricted stock.
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