Keeping it fresh! In class I gave an example of how stock options are an imperfect tool to align managerial interest with shareholder interests. Then bam! Here is an article suggesting stock-based bonuses do not work in the sense that 1-, 3-, and 5- year returns are statistically the same with or without the bonuses.
However, knowing how we do it in academia, it is a matter of time before another article finds a significant improvement with bonuses so we can arrive at the good ‘ol “results are mixed.” One day, when I am extremely bored, I would like to study just what and who within a firm have a significant impact on stock returns (positive or negative). Is it top-level management? The chief scientist? The CFO? Patents? Alas, it is the journey not the answer…
Efficient Minds™ 