Cost-efficient Performance-Vesting Equity

Skovoroda, Rodion; Bruce, Alistair; Buck, Trevor and Gregory-Smith, Ian (2019). Cost-efficient Performance-Vesting Equity. Economics Letters, 182 pp. 37–39.

DOI: https://doi.org/10.1016/j.econlet.2019.06.002

Abstract

We analyze the incentive effects of the Performance-Vesting Equity (PVE) component of executive pay that is characterized by zero exercise price and performance-contingent vesting. We demonstrate how PVE with upward-sloping convex/concave vesting curves can be a more efficient risk-sharing and incentive alignment device than strictly convex stock options.

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