Incentive Effects of Granting Equity-Based Payment on Reducing Top Executive Turnover

Abstract

The main focus of the study is to examine the incentive effect of granting equity-based payments for reducing turnover among the executives. In specific, the study was guided on determining the influencing effects of managerial ownership and equity-based payment may reduce executive turnover among the Malaysian Listed companies. From the analysis, the main finding shows that firms with equity-based programme with a presence of family control indicates that turnover is likely to be a lower. This implies that family ties play a significant role for removing of inefficient executives. And, where the family members are also served as the board members, the likelihood to shield from being removed is consistent with the management entrenchment hypothesis. Then, extended examination results for the mix pay components of cash and equity reveal the turnover is found to produce less incentive for executives to stay in the firm. The result implies that executives are willing to lose their equity benefits from unexercised value of shares equity and nd the firms fail to restrain executives’ departure as the findings documented in past studies.